A golden meltdown?

Source: Investing.com

At first sight, would you invest in something that had limited practical use, yielded no income and cost money (insurance, storage, etc) to own? 

Such are the frequently sighted criticisms of buying and holding gold. To that list can be added the one bizarre aspect of the gold market, which recently came to the fore as the spectre of President Trump’s tariffs loomed. Ahead of ‘Liberation Day’, there was a mad rush to bring physical gold into the US before it attracted a possible Trump tariff. Usually, gold investment transactions do not involve the movement of gold ingots – their ownership changes but they stay in the same vault, often those of the Bank of England, in London. However, the potential tariff made gold delivered to the US more valuable than gold elsewhere, which might face a tariff on later imports.  

Sending gold from London to New York sounds simple enough – give or take the security issues and the need to beat the 2 April ‘Liberation Day’ deadline. It was not. London dominates the market in physical gold trading – buying and selling bars – whereas the New York Comex market concentrates on derivatives, such as futures. The two different markets have two different standard gold bars. The UK ingot is typically 400-troy ounces, roughly 12.5kg, whereas New York’s standard is a more pocket-friendly size of 1 kg.

Cue a gold meltdown in more ways than one – as bullion bought in London for delivery in New York was first sent to Switzerland to be melted down and recast in US-sized ingots. In a world of instant electronic trading, this sounds like madness. But this is what happened in the first three months of 2025. The new ‘gold rush’ eventually saw aircraft being used to fly the smaller bars to the US before the feared deadline. Then, on 2 April, Trump chose to exempt gold from his tariffs.

His reprieve prompted an initial fall in the price of gold to below $3,000 an ounce before it bounced back to a new record high of over $3,400 by mid-April. The rally in the price was probably also Trump-related – by that time, some investors had decided gold was a safer bolt hole than the US dollar. We are living in strange times indeed.

The value of your investment and any income from it can go down as well as up and you may not get back the full amount you invested.

Past performance is not a reliable indicator of future performance.