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What’s up with gold?

May 6, 2025

What's Up with Gold?

What’s Up with Gold?

Gold is surging, yes, but for reasons that are a little more troubling than may at first appear.

Gold in USD

Bloomberg reports that there is unprecedented demand from the US to repatriate gold held by the Bank of England to avoid potential tariffs imposed by the Trump administration on the UK.

This has resulted in delays of 4–8 weeks in meeting demands for physical gold delivery by the London Bullion Market Association (LBMA), which is effectively a default by the LBMA.

Even before the Trump administration threatened tariffs on the UK (and others), there was disquiet over the freezing (theft) of $640 million in Russian assets by the West following its invasion of Ukraine in 2022.

The message went out loud and clear: don’t let anyone else custody your assets.

An Invesco survey of central bank and sovereign wealth funds published in 2023 showed a "substantial share" of central banks were concerned by the precedent that had been set. “Almost 60% of respondents said it had made gold more attractive, while 68% were keeping reserves at home compared to 50% in 2020,” reported Reuters.

The Bank of England reportedly stores 279 million ounces of gold but just 36 million ounces – what’s called the float – are reportedly available. What this seems to indicate is that much of this gold supposedly in vaults has been pledged to central banks, exchange traded funds, or foreign governments.

Concerns About Verification of Gold Reserves

  • Audits: While the Bank of England has systems in place for managing and auditing the gold, there's a noted lack of transparency, especially regarding independent audits. For instance, the case of the Reserve Bank of Australia's gold stored there shows that while an audit was allowed, the results were not publicly disclosed.
  • Gold Lending: The practice of gold lending complicates matters. Gold can be loaned out, meaning the physical gold might not be in the vaults at any given time, replaced instead by financial claims or obligations to return gold.

The Bank of India has repatriated more than 204 tons of gold from foreign banks but still retains 324 tons under the protection of the Bank of England. In 2014, Venezuela repatriated 160 tons of gold from European, American and Canadian banks, though the Bank of England in 2018 refused a request to withdraw an additional 14 tons.

Commentators questioning the Bank of England’s claimed gold holdings include Australian economist John Adams, precious metals specialist Ronan Manly and Mark O’Byrne, who argues the sudden movement of gold from London to New York goes beyond fears of tariffs to something potentially more sinister.

The question now being asked is: what has happened to the Bank of England’s gold? And until it provides a credible and transparent audit, those questions won’t go away.