Disruptions to Gold’s Price Reduce as Tariff Concerns Abate

Recently, there was a rush to ship gold to the U.S. amid fears that President Trump would also impose tariffs on gold exported to America. As shipments increased, a tightness in the supply of gold caused price differences to widen between the price of gold in the U.S. and the price in London and other major trading hubs.

The gap in price between the quotations on the Comex in New York and the spot market in London is now leveling off from a high of $60 witnessed in January to now approximately $10 per ounce. When the price difference was high, lucrative arbitrage opportunities were created, which led traders to move their gold from London and elsewhere around the world to New York.

Usually, the difference in price is often a few dollars, so the dropping price difference suggests that the incentive to move gold to New York is now ending and normal trading conditions are returning.

Bert Malek, TD Securities’ commodity strategy head, says there is now more gold in America than the country can retail. Asia has a more robust gold retail market, so those quantities currently in the U.S. would be unsurprising if they existed in Asia, he adds.

It should be noted that the cost of storing gold in New York is a lot higher than the storage costs in London. As the spreads in quotes for gold narrow even more, the cost of storing these huge amounts of gold in New York is likely to become a challenge to traders and they will likely move their holdings to locations like London which are more affordable.

Additionally, traders typically move their gold to markets where there is robust retail trading. Given that America doesn’t conduct a lot of retail trade in gold, the motivation to keep physical gold in New York is likely to decline and stockpiles will be moved to other trading hubs.

Currently, the trade tariffs situation is still very much in flux, and no one can say with certainty whether or not Trump will impose tariffs on this commodity. It is still possible for the price difference between gold in London and New York to widen again. With no clear direction on how the tariffs issues will go, traders may remain motivated, for now, to keep their gold in the U.S. despite the high storage costs.

Entities like First Tellurium Corp. (CSE: FTEL) (OTCQB: FSTTF) will continue watching these market dynamics as they evolve to glean whether there are significant changes in the market that warrant their long-term attention.

NOTE TO INVESTORS: The latest news and updates relating to First Tellurium Corp. (CSE: FTEL) (OTCQB: FSTTF) are available in the company’s newsroom at https://ibn.fm/FSTTF

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