Banks like JPMorgan and HSBC are flying gold worth billions from London to New York. Here's why

The stampede to get gold to the US comes at a time when President Donald Trump has said that Europe’s trade stance was an atrocity compared to the US

Multiple prominent banks are transporting their gold to New York City from the Bank of England's vaults in London where they were stored, due to gold prices rising to record highs in the US compared to the UK.

The nine vaults in London's Threadneedle Street hold hundreds of tonnes of the precious metal, valued over £200 billion ($252 billion). This is the world’s second-largest depository of gold.(Representational Image/Unsplash)

The price rise came as investors flocked to the safe haven asset due to fears that President Donald Trump is going to start a trade war.

JPMorgan and HSBC are two of the biggest names flying their gold to the US with Citigroup planning to join soon as well, according to a report by The Wall Street Journal which added that this is to cover losses on short positions.

The nine vaults in London's Threadneedle Street hold hundreds of tonnes of the precious metal, valued over £200 billion ($252 billion). This is the world’s second-largest depository of gold.

They fly the gold using the cargo area of commercial flights, which happens to be the cheapest way to transport gold.

New York gold futures rose 11% this year, closing on Wednesday at $2,909 a troy ounce with some analysts projecting it could hit $3,000 a troy ounce for the first time, the report read.

However, London prices have been about $20 lesser since early December which is an unusual discount.

Even the interest rate to borrow gold has skyrocketed, showcasing a sign of the strain on some market players.

This stampede to get gold to the US comes at a time when Trump has said that Europe’s trade stance was an atrocity compared to the US. He then imposed tariffs on the region.

Gold prices then saw big shifts after Trump unveiled 25% aluminum and steel tariffs on February 13.

JPMorgan alone said that it planned to deliver $4 billion of gold this month, according to the report which cited Comex filings.

The last time such an occurrence happened was in 2020, when the coronavirus pandemic shut down Swiss refineries and grounded flights.

However, transporting gold also has challenges. Comex contracts need a different size of gold bar, which means traders have to send their gold to Swiss refiners to recast it before flying it to the US.

As a result, sometimes they exchange the old for the right size in London itself, or they fly the bullion from Australia instead, according to the report.

The flood of gold to New York had actually begun soon after Trump’s election victory.