The U.S. has placed tariffs on large gold bars, specifically those weighing 1 kg and 100 oz, which affects gold from Switzerland and London. This move disrupts the gold market by making Swiss bars, accepted by COMEX for delivery, harder to access. This creates challenges for London’s bullion banking.

Supply Restrictions and Basel III Pressures

These tariffs limit the supply of gold available for delivery, creating more pressure on banks to hold physical gold according to Basel III standards. They also reduce how the LBMA can reuse gold bars as collateral and threaten Switzerland’s dominant position in refining, while boosting COMEX’s role in setting global gold prices. In London’s unallocated gold market, rehypothecation allows banks to use the same gold bar as collateral several times. The new tariffs complicate acquiring gold bars in the needed formats, essential for settlements, reducing leverage and liquidity in London. The London Bullion Market Association (LBMA) governs this market, establishing gold and silver standards for international trade. It oversees the clearing system for most wholesale gold trades, enabling major banks and traders to take on high leverage. However, with fewer deliverable bars available, its ability to provide liquidity and rehypothecate is weakened. The U.S. tariffs on specific gold bars are tightening the market. COMEX gold futures have surged past $2,550 an ounce, creating a significant gap between the London and New York markets.

Tariffs and Market Dynamics

For those trading derivatives, this indicates a bullish outlook in the upcoming weeks. The tariffs make it expensive for short sellers to deliver physical gold, pushing many to buy back at higher prices. Open interest in the front-month contract has dropped by 15% in the last two weeks, suggesting shorts are covering their positions. We are noticing a widening premium of COMEX futures over the London spot price, now exceeding $50. This spread shows the added cost and challenges of obtaining and shipping non-tariff-ed gold to New York. Trading this spread could be a smart strategy as logistical issues persist. The physical market data reflects this pressure. Since late July 2025, COMEX registered gold inventories have lost nearly 1.5 million ounces. This reduction in available supply gives buyers a stronger position to negotiate. This structural strain is causing a rise in implied volatility. The CBOE Gold Volatility Index (GVZ) is at its highest level since early 2023 during a banking crisis. Traders might want to buy call options for upside potential while minimizing downside risks. This situation mirrors the market disruptions of March 2020, when pandemic-related flight cancellations disrupted physical gold trading. Back then, the COMEX premium soared, benefiting those holding long futures. We may be witnessing the early stages of a similar scenario caused by these tariffs. Create your live VT Markets account and start trading now.

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