Gold Flying From London To New York Destined For Higher Prices
Gold is flying out of the Bank of England’s vaults at a rapid pace, to the point that what used to take a day or two to deliver is now taking weeks. Which brings into question why are buyers wanting to drain physical gold from the Bank of England and why are they having so much trouble delivering?
The leading speculation amongst commentators on gold is that the reason gold is leaving London and heading to America is due to Trump’s tariffs. And that physical gold could have tariffs put on it, but Trump hasn’t said anything about that.
Trump has telegraphed his tariff plans well ahead of doing them, maybe some have caught wind that he will put a tariff on gold or are speculating he will. But, the actions that are happening certainly don’t look like a speculation trade that gold will be tariffed.
It looks like the Bank of England has a problem, they hold physical gold for commercial banks, other countries and central banks. Which means they shouldn’t be having problems delivering what they are holding for others. It should be in their vaults ready for delivery. The problem has gotten so severe that now they are scrambling to borrow physical gold from central banks to meet the demands. They are squeezed and have an expensive problem to fix.
What seems much more likely is that there is a significant increase in the paper traders of gold asking for delivery. And the American bullion banks are having issues delivering the physical gold.
Although there is a very big market for paper trading gold, it is highly leveraged and there just isn’t enough physical gold backing up those trades. So, there is the potential massive issue if more traders start asking for delivery.
Which is likely what the movement of gold out of London to New York is all about, thus the Bank of England and the American bullion banks have a problem that could drive the price of gold up dramatically.
To put things into context, the central bankers inside and outside the BRICS nation have been loading up on physical gold since the 2008 GFC. Over the past few years, they have dramatically amped up their buying. They are hoarders that have taken a lot of physical gold off the market.
There is only so much physical gold available above ground which is a tiny fraction of the amount that is traded through paper contracts. This is causing a problem in London and New York that is driving gold to new record highs. And it is likely just getting warmed up.
Big players leave big footprints and they are wanting more physical gold, but the key question is where are they going to get it from? The central bankers in and outside the BRICS nations aren’t likely to sell them because they want to increase their reserves and own less debt and fiat currencies.
The big players loading up on physical gold in America are seeing an opportunity and positioning themselves to gain from it.
The central bankers outside of America have been loading up on gold primarily because America, and other countries, are in a Death Spiral of Debt, made acute by the cost of servicing the debt. But, America has another developing problem with economic growth slower than inflation, with the inflation growing well beyond the Fed’s target.
Trump’s actions to impose tariffs and mass deportations will without a doubt slow the economy down and increase inflation. So, a brewing stagflationary problem is about to get much worse.
It is an immediate problem that hasn't shown up in the economic numbers yet, but it will before the farcical government economic statistics give the Fed dots to plot. Tariffs will immediately cause prices to go up driving inflation higher in a blink of an eye. As will the economic ramifications of mass deportations.
American consumers and companies benefit from the low-wage migrant workers. They are being deported, and leaving the country to avoid deportation. Fear is spreading as migrant workers aren’t showing up for work out of concern that they will be met by ICE officers.
Tariffs and mass deportations are going to cause a much more troublesome stagflation problem in America that is not transitory.
The global tightness in physical gold and stagflation are very bullish for gold. Stagflation is also very bullish for silver.
Paper traders that are taking delivery of physical gold are causing a problem from London to New York. This is going to cause serious problems for the paper market and will put the pricing of gold into the hands of the physical gold buyers and physical gold sellers.
Demand for physical gold is now breaking the back of the paper traders. It has been a developing issue for a long time, but now it is happening in real time.
Not only are the vaults at the bullion banks bare, but the gold miners aren’t in a position to help the bullion banks and paper traders out. They are struggling to increase production, while some of the major miners are producing well below their all-time highs.
In addition, gold miners are struggling to replace their old mines with new mines. Plus, there aren’t enough new gold mines in development to help the majors increase production or replace their old mines with new mines. Looking at the explorers, they have been struggling for a couple decades to make important discoveries that can then move into the development phases.
No matter where you look along the physical gold pipeline, the supply chain is broken, from the weakest to the strongest links in the chain.
With the flight of physical gold from London to New York driving gold higher it will add fuel to the fire of the gold bull market.
Plenty of gold stock bulls have been looking for what will bring the gold stocks into the gold bull market. The catalyst has arrived and is already affecting the gold stocks in a bullish way.
Lately, I have seen significant breakout of gold miners, developers and explorers. This didn’t happen in 2024, but it is happening now.
Gold is primed to go much higher, and silver is ready to join the gold bull market due to the bullish action that happens in gold and silver during a stagflationary environment in America and in other countries.
Now it is time for the gold and silver stocks to move aggressively into the gold bull market. Best in breed gold miners, high-cost gold miners that are seeing a big turnaround to their bottom lines, gold and silver mine developers with high-quality projects and explorers with important discoveries are ready to get much more bullish.
All the best,
Allan Barry Laboucan
