Recent Tariff Effects on Gold
By: Ben Lewis
News Update: Gold Markets in London and New York
London and New York have long served as the two of the most prominent trading hubs for gold. U.S. tariff policy from President Donald Trump has thrown the market for precious metals into a frenzy. Trump announced broad aluminum and steel tariffs this past week, which increased the gold price spread despite it being unclear whether the tariff would directly influence gold prices. Historically, investors have viewed gold as a hedge against the market in times of heightened risk and uncertainty. This is because gold is an inherently valuable asset due to its many uses, scarcity, and durability. Gold prices have been approaching record highs in the U.S., while U.K. prices are substantially lower. Gold prices have grown 11% already in 2025 and many analysts expect one troy ounce to reach a record of $3,000.
Since December futures prices in New York have been at least $20 higher than London per troy ounce of gold, which is an abnormal discount. Large banks like J.P. Morgan, HSBC Holdings, and CitiGroup have been cashing in on the market disparity. These banks are among the entities which have begun withdrawing gold stashed below London’s streets and from Swiss gold refineries. This rush to funnel gold out of London has been so substantial that there is a weeklong line to withdraw from the Bank of London’s underground stock of bullions (precious metal retailer). Many bankers eager to cash in on the high New York prices have been pleading with officials to speed up the process. Officials have remained strict on the line to withdraw in order to remain fair and just. The cheapest way to transport this massive amount of gold is in the cargo hold of commercial planes.
Typically, traders use purely derivatives to trade gold, but when international markets are not moving in unison, this changes. Many banks hedge their positions in futures by holding large offsetting positions in physical gold which is largely stored in London. Traders can always fly physical bullions to wherever prices are higher, and right now it happens to be occurring at an unusually large scale. J.P. Morgan is planning to deliver as much as $4 billion in gold just this month.
What does this mean for the average investor?
This surge in prices will present a large earnings opportunity for previous owners of gold assets. New investors should be very cautious and conduct thorough research before attempting to cash in on the surge in gold prices. Also, investors should consider the implications on manufacturers and how increased gold prices will affect them. Currently, manufacturers that use gold in production are struggling to adjust prices and have lost money. Companies that use gold alternatives may thrive, and companies within gold-related industries will be interesting to examine and research. Overall, these price changes present an interesting opportunity to make predictions about where the gold market and specific companies might go, but investors should tread cautiously due to the volatility of gold prices and uncertainty around the effects of Trump’s tariffs.
