Gold’s price disruption eases as Trump tariff trade cools off

Gold’s extreme price dislocations are fading as tightness in the physical market eases, indicating a rush to ship bullion to America may have run its course. The gap between Comex futures and spot gold has now shrunk to around $10 an ounce from highs of about $60 in January. The trade incentive is coming to an end after the surge in inflows to the US.

The cost of borrowing gold in London has also fallen, indicating that the trade is unwinding. The trade is getting exhausted as there are now a lot of kilo bars in the US, which is not a natural market,  while Asia, which more typically takes such bars, boasts a robust retail market. Lease rates for borrowing gold in London are also coming down.

The implied interest rate, which is derived from subtracting gold’s forward swap rate from the interbank cost of money, hit its highest point in decades in January as banks sought to secure bullion to deliver into Comex short positions. It’s now at a more normal level, close to zero.

Lease rates for borrowing gold in London are also coming down. The implied interest rate hit its highest point in decades in January, and is now at a more normal level, close to zero.