The World Gold Council (WGC) has highlighted the impact of trade uncertainty on market reactions, leading to a shift in trading behavior and affecting the gold price. Despite gold not being directly targeted by tariffs, there have been notable disruptions in the market.
According to WGC experts Juan Carlos Artigas and John Reade, the movement of gold from London to the US and the rise in COMEX premiums were primarily driven by risk management decisions rather than actual supply issues. They predict that these disruptions will ease in the coming weeks as inventories stabilize.
Trade data indicates that a significant portion of gold flowing into the US originates from Switzerland, with some potentially coming from the UK for refinement into 1 kg bars accepted by COMEX futures. Other sources of gold include Canada, Latin America, Australia, and domestic mine production in the US.
While these trade-related disruptions are likely to be temporary, they serve as a reminder of the global interconnectedness of financial markets. The depth and liquidity of the gold market have shown resilience in absorbing such shocks over time.
Flight-to-quality flows have also supported gold prices amid increased financial market volatility linked to geopolitical concerns. The surge in gold imports into the US in late 2024, driven by tariff concerns, caught many observers by surprise, as the country is self-sufficient in gold production and consumption.
Short-term speculators and investors have been preemptively moving gold to the US to avoid potential tariff-related costs, leading to an increase in COMEX inventories and a rise in futures prices compared to spot prices. These trends have been seen before, such as during the COVID pandemic, and the market has eventually normalized.
In conclusion, while the gold market may experience temporary disruptions due to trade uncertainty, historical examples show that it has the ability to adapt and stabilize over time. The resilience of the gold market, combined with the diverse sources of gold supply globally, suggests that it can weather these challenges and continue to function effectively.
