Gold Market Turmoil: COMEX Inventories Soar as Investors Hedge Against Trade War Risks
The global gold market is experiencing a massive gold rush, with traders shifting from paper gold contracts to physical gold reserves, causing gold prices to surge. The catalyst? US President Donald Trump’s tariff threats, which have rattled commodity markets and fueled concerns over supply chain disruptions.
As a result, gold stockpiles in New York have nearly doubled since November 2024, while gold futures are now trading at a premium over spot prices due to heightened demand.
Gold Stockpiles Surge in New York as Traders Hoard Bullion
Investors are scrambling to secure physical gold in anticipation of potential tariffs on gold imports, which could push gold prices to record highs.
- COMEX gold inventories in New York surged from 17.5 million troy ounces in November 2024 to 33.38 million troy ounces by early February 2025.
- This shift highlights a global liquidity crunch in gold markets, forcing traders to stockpile reserves to hedge against trade risks.
COMEX Gold Futures Trading at a Premium
The heightened demand for physical gold has created a supply imbalance, causing gold futures on COMEX to trade at a premium compared to London spot prices.
“This unprecedented shift in gold markets signals extreme caution among financial institutions. Risk managers are aggressively accumulating physical reserves to shield against potential tariff shocks,”
— Jigar Trivedi, Senior Analyst, Reliance Securities
Bank of England Faces Delays in Gold Withdrawals Amid Rising Demand
The gold rush isn’t limited to the US. In London, the Bank of England (BoE), a key global gold storage hub, is witnessing a spike in withdrawals.
- Previously, traders could withdraw physical gold within a week.
- Now, gold withdrawal timelines have increased to 4–8 weeks, signaling a supply squeeze.
Reports indicate that major bullion banks in Asia are also diverting gold reserves to the US, further exacerbating supply constraints.
Adding to concerns, a Financial Times report suggests that private vaults owned by HSBC and JPMorgan in New York have received undisclosed shipments, possibly exceeding official estimates.
Impact on India: Gold Demand Drops Amid High Prices
Indian Gold Prices Trade at a Discount as Physical Demand Weakens
While global gold prices continue to rally, demand in India remains muted due to record-high gold rates.
- Physical gold in India is trading at a discount compared to gold futures, suggesting weak retail demand.
- On the MCX (Multi Commodity Exchange of India), gold trading is driven by speculation rather than real demand, noted Bhavik Patel, Senior Analyst at Tradebulls Securities.
However, jewelry manufacturers and gold retailers are beginning to feel the effects of tightening supply and rising costs.
Jewelry Industry Faces Higher Gold Lease Rates
Titan Company & Kalyan Jewellers Expect Cost Pressures
Indian jewelry companies like Titan Company and Kalyan Jewellers have expressed concerns about rising gold lease rates, which could impact profit margins.
“We’ve seen gold lease rates rise slightly in recent weeks as banks respond to supply constraints. The situation is fluid, and we are closely monitoring the impact on pricing,”
— Vijay Govindarajan, Associate VP – Finance, Titan Company
Despite these concerns, Kalyan Jewellers CEO Ramesh Kalyanaraman assured that higher lease costs won’t be passed on to customers, ensuring stable jewelry prices.
Meanwhile, gold financing NBFCs are set to benefit as loan-to-value (LTV) ratios rise, allowing borrowers to secure higher loan amounts for the same gold weight.
Outlook: Will Gold Prices Continue to Rise?
The gold price rally fueled by Trump’s trade policies and supply chain constraints could continue in the short term. However, analysts caution that Indian demand remains weak, limiting the domestic impact of global price movements.
- Gold prices could rise further if tariffs on imports materialize.
- Jewelry prices remain stable despite higher lease costs.
- Indian gold demand remains subdued due to high prices.
For gold investors and traders, the coming weeks and months will be crucial in determining whether this trend sustains or reverses, depending on global trade policy developments.
