Gold prices have continued their upward trajectory, marking seven straight weeks of gains in the domestic market and eight weeks in the international market.
The rising demand for the precious metal has been driven by geopolitical tensions, economic uncertainty, and fears of a trade war following US President Donald Trump's tariff policies.
In India, gold prices on the Multi Commodity Exchange (MCX) climbed from ₹76,544 to ₹86,020 per 10 grams, registering an increase of ₹9,506 over the past seven weeks. The yellow metal recorded a weekly gain of 1.57 per cent, reflecting a strong bullish trend.
In international markets, gold prices reached a fresh high of $2,954.94 per ounce, driven by several factors. The recent weakness in the US dollar, increased exchange-traded fund (ETF) inflows, central bank rate cuts, and the tariff war initiated by the Trump administration have all contributed to the surge.
However, an overlooked factor behind the rising prices is the outflow of physical gold from the Bank of England to central banks across the globe, particularly to the United States.
Market observers note that JPMorgan Chase and HSBC have been transporting gold from London to New York using commercial flights.
Experts believe that Donald Trump’s imposition of tariffs on gold imports from Europe has resulted in a supply squeeze, increasing gold demand in the US.
As a result, major banks have been shifting their reserves from London vaults to New York to take advantage of higher prices in the US.
The stockpile of gold in NY COMEX vaults has reportedly risen by approximately 20 million in the last eight weeks, triggering speculation over a possible London Cash Gold Contract default.
Sugandha Sachdeva, Founder of SS WealthStreet, highlighted that the ongoing US-Europe tariff dispute has created global trade uncertainties, impacting gold prices.
She noted concerns that the Trump administration might extend tariffs to gold, following recent 25 per cent import duties on aluminium and steel.
This expectation has led to increased gold demand in the US, pushing prices higher. Typically, gold prices in the US and the UK move in tandem, but the recent price disparity has encouraged major banks to relocate their reserves.
Reports suggest that nearly 2 per cent of the Bank of England’s total gold reserves have been moved from its vaults in recent months.
Anuj Gupta, Head of Commodity & Currency at HDFC Securities, explained that private and central banks are moving gold from the Bank of England’s vaults to take advantage of the price differential between Europe and the US.
He stated that while some banks are exploiting this price gap, others are transferring gold as a hedge against financial uncertainty. The speculation surrounding a London Cash Gold Contract default has further intensified the demand for physical gold.
India has not remained untouched by these developments. The Reserve Bank of India (RBI) has also increased its gold holdings, following the lead of American banks.
According to reports, the Indian central bank transferred 100 tonnes and 102 tonnes of gold from the Bank of England’s vaults in May and October 2024. With these transfers, India’s total gold reserves now stand at 855 tonnes, with 510.5 tonnes stored domestically.
Gupta further stated that Trump’s tariff policies are not the sole driver behind the ongoing gold rally. Several factors, including geopolitical risks, inflation concerns, and fears of a global economic slowdown, are contributing to the metal’s rising value.
The increasing trend of gold transfers from the Bank of England is yet another element adding to market uncertainties.
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