Explainer: Why the Bank of England’s gold reserves are shrinking

​The Bank of England (BoE), one of the world’s largest custodians of gold, has experienced significant outflows from its reserves in recent months.

Reports indicate that thousands of gold bars have been withdrawn from BoE vaults as traders anticipate potential US tariffs on precious metals under President Donald Trump’s administration. ​

This movement has predominantly been from London to New York.

The surge in demand has led to logistical challenges, with waiting times for gold withdrawals increasing from a few days to several weeks.

Additionally, there is a shortage of 400-troy-ounce bars—the standard in London—as many need to be melted down and recast to meet New York’s specifications. ​

Reasons behind the surge

The primary driver of these withdrawals is speculation that the Trump administration might impose tariffs on gold imports, making cross-border gold movements more expensive.

Market participants, especially bullion banks and hedge funds, are proactively relocating gold to New York to circumvent potential costs. ​

Some analysts believe that logistical hurdles at the Bank of England have fueled conspiracy theories suggesting a shortage of gold.

However, officials deny these claims, asserting that delays are due to high demand rather than a depletion of reserves. ​

Impact on global gold markets

Rising gold prices: The rush to secure gold ahead of potential US tariffs has heightened demand, pushing global gold prices to record highs, surpassing $3,000 per troy ounce. ​

Effect on Indian gold imports: India, as one of the world’s largest gold consumers, could face price surges if London’s supply chain disruptions persist. Since India imports most of its gold, rising prices would likely make gold more expensive for Indian buyers, potentially dampening demand.​

Strengthening gold’s safe-haven appeal: The ongoing transfer of gold to New York indicates that investors are preparing for economic uncertainties, reinforcing gold’s status as a hedge against risk. ​

Looking ahead

Market observers will closely monitor whether the outflow from the Bank of England stabilises or accelerates.

Should the US administration implement tariffs, global gold flows could be significantly reshaped, potentially diminishing London’s role as a central hub for gold storage and trading.