By Rajendra Jadhav
MUMBAI (Reuters) – International bullion banks are flying gold into the US from buying and selling hubs catering to Asian customers, together with Dubai and Hong Kong, to capitalize on the unusually excessive premium that U.S. gold futures are having fun with over spot costs.
Historically, bullion banks transport gold eastward from the West to fulfill demand from China and India, the world’s two largest customers, accounting for nearly half of world consumption.
However alarm about U.S. import tariffs deliberate by President Donald Trump has pushed Comex futures costs considerably above spot costs in current months, making a profitable arbitrage alternative.
“Gold costs are skyrocketing, and in Asia, demand has just about disappeared,” mentioned a Singapore-based bullion seller with a number one bullion supplying financial institution. Spot gold costs hit a file excessive on Monday. [GOL/]
“In the meantime, a candy alternative has popped up within the U.S., and naturally, nearly each financial institution is leaping on it — shifting gold over for Comex supply to money in on the arbitrage,” he mentioned.
COMEX gold inventories have shot up nearly 80% since late November, or 13.8 million troy ounces value greater than $38 billion at present costs, with provides coming from London, Switzerland and now Asia-focused hubs.
The premium on Comex futures over spot costs widened once more to about $40 on Monday, in contrast with reductions as excessive as $15 in India and a reduction of round $1 in China.
The price of shifting gold from Asian hubs to the U.S. is fractional in comparison with prevailing Comex premiums, mentioned a Mumbai-based bullion seller.
A number one bullion financial institution even moved gold saved in a customs-free zone in India to the U.S. final week, he mentioned.
In regular conditions, many banks convey gold into India and hold it in customs-free zones, clearing consignments by paying import taxes solely after realizing demand. They will transfer the cargo again abroad with out paying taxes.
As retail demand in Asian markets was muted by excessive costs, bullion banks had been even sourcing gold from refiners in Dubai, which often function a significant India-supplying hub, to cater their demand within the U.S, mentioned a Dubai-based bullion seller.
“The U.S. is sort of a gold magnet proper now, pulling in gold from everywhere in the world,” he mentioned.
(Reporting by Rajendra Jadhav; Extra reporting by Polina Devitt and Ashitha Shivaprasad; Modifying by Veronica Brown and David Evans)