(Bloomberg) \u2014 The global gold market relies on a network of banks, refineries and couriers that can fly bullion between key trading hubs at a moment\u2019s notice in pursuit of the highest prices. On Friday, a shock US ruling suggesting that the metal would be subject to tariffs plunged that system into chaos.<\/p>\n
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The apparent decision by the US Customs and Border Protection agency \u2014 announced privately in a letter to a Swiss refiner on July 31 and made public Friday \u2014 sent gold futures in New York soaring to a record, as insiders warned the tariffs would have dire consequences for the market. Then, just as quickly, prices tumbled after the Trump administration suggested imports of gold bars wouldn\u2019t face tariffs after all.<\/p>\n
It was the latest example of President Donald Trump\u2019s trade war triggering wild gyrations in markets, for equities, raw materials and finished products alike.<\/p>\n
Gold bullion is typically treated more as a financial instrument than a physical product, and slapping tariffs on it would have such profound consequences that many traders argued Friday the ruling had to be a mistake.<\/p>\n
\u201cThe problem was that the government didn\u2019t look outside of the question of the physical format and did not take into consideration that this widget was actually gold,\u201d said Robert Gottlieb, a former precious metals trader and managing director at JPMorgan Chase & Co.<\/p>\n
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A complex and sometimes fragile system for making and moving gold bars underpins the global market for the metal, including the futures exchanges in New York and Shanghai as well as a huge over-the-counter market overseen by London banks. Key consumer hubs in Mumbai, Dubai and Hong Kong rely on it as well.<\/p>\n
There is more than $1.1 trillion in gold bars stored in vaults to underpin trading in New York and London alone, with much of it stored by major dealers including JPMorgan and HSBC Holdings Plc.<\/p>\n
Refineries in Switzerland play a crucial role in facilitating the flow of gold between London and New York. A trade group representing them said Friday that the apparent tariffs would render any future US shipments unviable. Asian refineries put a temporary halt on US-bound sales. At the epicenter of the turmoil in New York, observers warned that tariffs would pose a major threat to the gold futures market itself.<\/p>\n
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\u201cThe disbelief isn\u2019t just that several billion dollars have been made and lost overnight,\u201d said Ross Norman, a four-decade veteran of the industry who now runs Metals Daily, a pricing and analysis website. \u201cThe problem is we\u2019re not in a good position when things become disrupted. When things blow out, you get lots of injuries.\u201d<\/p>\n
The dysfunction was immediately reflected in the spread between prices on CME Group Inc.\u2019s Comex exchange in New York and the global benchmark price set in London. New York futures hit a new high above $3,530 an ounce on Friday, while the London market was more than $100 lower.<\/p>\n
That was a record gap, but the 3% spread would be nowhere close to covering the apparent cost of import levies, which would differ from country to country under Trump\u2019s reciprocal tariff regime.<\/p>\n
Typically, if New York prices rise sufficiently, the large-format bars that are traded in London are melted down in Switzerland and recast as smaller, 1-kilogram (2.2 pound) bars that are deliverable on Comex. But with Switzerland facing a 39% reciprocal tariff, Comex prices would have needed to rise to about $4,700 an ounce for the shipments to become feasible.<\/p>\n
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To plug the gap, US buyers might have been able to turn to other key suppliers, including Canada and Mexico. But Trump has threatened stiff tariffs on those countries, too.<\/p>\n
Unlike gold miners, independent refineries survive on razor-thin margins. The Swiss trade group warned Friday that shutting them out of such a significant market would have adverse consequences for the global gold trade.<\/p>\n
The hope \u2014 similarly held among the investors, traders, banks, and logistics firms blindsided by the US ruling \u2014 was that the White House would step back from the brink. It may do just that: The administration intends to post an executive order clarifying what it called misinformation about the gold tariffs, according to an official.<\/p>\n
\u201cFrom day to day, we learn more about new rules that could dramatically change the landscape of each commodity,\u201d said Darwei Kung, head of commodities and portfolio manager at DWS Group. \u201cPerhaps more change will result from the negotiation in the days to come.\u201d<\/p>\n
\u2014With assistance from Elise Harris.<\/p>\n
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\u00a92025 Bloomberg L.P.<\/p>\n","protected":false},"excerpt":{"rendered":"(Bloomberg) \u2014 The global gold market relies on a network of banks, refineries and couriers that can fly…\n","protected":false},"author":2,"featured_media":55571,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[64,63,1071,99,2490,46020,46023,46022,45107,45105,45108,2022,171,1025,46021],"class_list":{"0":"post-55570","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets","8":"tag-au","9":"tag-australia","10":"tag-bloomberg","11":"tag-business","12":"tag-donald-trump","13":"tag-futures-exchanges","14":"tag-global-gold-trade","15":"tag-global-market","16":"tag-gold-bars","17":"tag-gold-futures","18":"tag-gold-market","19":"tag-london","20":"tag-markets","21":"tag-new-york","22":"tag-us-customs-and-border-protection"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/55570","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=55570"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/55570\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/55571"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=55570"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=55570"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=55570"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}