Gold spot prices remain steady, even with a rise in COMEX futures caused by unexpected tariffs that have taken the market by surprise. These tariffs make gold pricier in the US than overseas, leading to a rare price difference between COMEX and London Metal Exchange (LME) futures. Gold shipped from London to the US has to be refined in Switzerland to match COMEX bar size requirements. This refining is costly due to the tariffs, which raises gold prices in the US. Switzerland is vital in this process, refining 90% of gold from industrial mines, further complicating the situation.

Market Uncertainty

There is uncertainty in the market as the gold rush seen in January and February has not continued. Companies like UBS warn of possible funding stress due to the tariffs. Although the situation is dynamic, gold lease rates have not significantly changed and are sitting at about -0.18%. Gold prices are around $3,392, while COMEX futures are rising as traders evaluate the scenario. A key question is whether the US is acting intentionally or making a mistake. Clarifications from the Trump administration could affect future prices and may lead to a revaluation of US Treasury-held gold, impacting the supply chain. Should demand rise, it could also lift spot prices as the market adjusts. As of today, August 8, 2025, the widening gap between COMEX and London gold prices is a critical indicator. COMEX futures for December delivery are trading at over $75 more than the London spot price, a difference not seen since the supply chain issues of 2020. This points to a significant structural problem in the US market from the unexpected tariffs. This situation opens up a clear arbitrage opportunity but also highlights significant delivery risks. The tariffs increase the cost of bringing gold to the US, especially since most needs to be recast in Switzerland. Recent data shows that open interest on COMEX has surged by 8% in the first week of August, indicating that traders are getting ready for a possible squeeze.

Risk Management Options

Given the uncertainty around the Trump administration’s intentions, using options is a wise way to manage risk. Implied volatility for gold options has spiked, with the Cboe Gold Volatility Index (GVZ) reaching its highest level since March 2025’s market jitters. Buying call options or call spreads allows traders to take part in a potential price surge while limiting losses. A similar, though smaller, disruption occurred in spring 2020 when the pandemic halted flights and disrupted the physical supply chain. Back then, the COMEX premium surged as traders raced to acquire physical bars for delivery against futures contracts. Now, the disruption is political, which may prolong the situation and result in more significant outcomes. Despite the rise in futures, gold lease rates remain low, with the one-month forward rate around -0.18%. This suggests there is currently no panic for physical gold in London, and large institutions still have supply access. A sudden increase in these rates would signal a genuine physical shortage in the market. If this is a calculated US strategy to revalue Treasury reserves, the current spot price of around $3,392 may just be the beginning. Such a move might force paper shorts to struggle to find physical gold for delivery. A speculative long position in far-dated COMEX futures could greatly reward those who believe this view. Create your live VT Markets account and start trading now.

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