Gold prices rose to a new record of $2,862.90 on Friday 31 January, as a mixture of real events and misperceptions of other events led investors to go long gold.

On the real side of the ledger, there has been an arbitrage opportunity large enough to provide a profit to traders and others who buy gold and silver in London, sell in the New York market, and ship the metal across. This emerged in the fourth quarter of 2024 and has grown larger.

As the arbitrage became apparent speculators joined the trading. Around 13 million ounces of gold has moved from London to New York in the past few months.

This real opportunity has been magnified by investors and speculators adding to the story. Some have thought that the movement of gold from London might lead to a shortage of deliverable gold in London.

This is not accurate. There are enormous volumes of gold available to meet new demand in London, perhaps around 100 million ounces just in LBMA registered depositories in central London. Additional gold inventories are outside the LBMA capture area.

As the chart at the top of the next column illustrates, there were 283 million ounces of gold in LBMA registered depositories at the end of December. Some of this, a few million ounces in reality, has been taken out. Most is still there, and perhaps more than a third of it is unallocated and available for acquisition.

In addition to the gold in London and elsewhere in the United Kingdom there are massive amounts of gold in Switzerland and other countries. Private gold bullion holdings in Switzerland most likely exceed 500 million ounces. From 2008 through September 2024 alone there were 362 million ounces of gold imported into Switzerland on a net basis.

Clearly Europe, let alone the world, is not running out of gold.

In addition to this misapprehension about London ‘running out of gold,’ there were speculative shipments of gold from London and elsewhere into the United State on the hypothetical concept that any tariffs the Trump Administration might impose on imports from Canada, Mexico, China, and other countries could apply to gold and silver.

A third misunderstanding added to the speculative buying built on top of the reality of gold moving from London to New York. That factor was a lack of understanding of how internationally traded markets and arbitrage opportunities between geographic markets work.

The reality is that arbitrages work in both directions. Were the London gold market actually to ‘run low’ on gold, however unrealistic that is, the price in London would rise sharply relative to the prices in New York, Zurich, and other gold market centers, encouraging traders and speculative investors to ship gold back into London.

In summary of this one factor: There has been a real arbitrage opportunity that had led around 13 million ounces of gold to be shipped from the London market to the New York market, but this neither indicates that London is running out of gold nor is it a permanent market trend.

None of this should belittle the fact that investors have been buying outsized volumes of gold, based on concerns about the sharp increase in political and economic risks around the world.

This reality has led investors to increase their net purchases of physical gold roughly 37% from 24.1 million ounces in 2023 to 32.9 million ounces in 2024. CPM projects a further 35% increase in net investor gold demand in 2025, to around 44.4 million ounces.

This real demand for physical gold by investors around the world has propelled gold prices sharply higher since the beginning of 2024. It is projected to continue to exert upward pressures on gold prices this year, reflecting the expectation that political and economic risks will continue to drive investors demand for gold higher.

Central banks also are interested in moving gold into New York. Central banks bought an estimated 8.0 million ounces of gold in 2024. There were 20 central banks that bought gold and 12 that were net sellers last year. Official data are available only through November, when the total net official purchases were 7.6 million ounces.

Of this, around 1.3 million ounces of gold purchased by eastern European central banks was shipped into New York and added to the gold held at the New York Federal Reserve Bank on account of foreign countries. Poland, Czech Republic, Hungary, Serbia, Georgia, and three other countries close to or bordering Russia bought more than 8 million ounces of the gross total purchases of 9.3 million ounces bought by central banks through November 2024.