Amid concerns that U.S. President Donald Trump may impose tariffs on imports, a surge of gold shipments to New York has created a gold shortage in London, according to a recent report in the London Financial Times. But, such reports simply don’t hold up under scrutiny. A closer examination reveals a different story.

Political and Economic Inconsistencies

It is hard to reconcile the idea that a Republican president—who relies on the support of investors and advocates of sound money—would deliberately risk alienating core supporters by imposing tariffs on precious metals. Not only would such a move undermine the traditional role of gold as a “safe haven,” but it would also conflict with longstanding political positions that favor a stable, transparent market. Indeed, U.S. trade and tariff policy, as evidenced by recent developments, has not targeted physical bullion. For instance, even though Trump imposed steep tariffs on imports from Canada and Mexico (which lasted only a few hours before they were withdrawn!), gold and silver would both remain tariff‑free, given that the bulk of physical bullion can be imported via channels (such as Swiss refiners) that bypass any potential U.S. trade duties.

Commodity Market Data Speaks Louder

A detailed look at recent commodity price movements further undermines the tariff narrative. On November 4, 2024, the spot price of gold was approximately $2,734.36 per ounce, and it has since risen by about 8.45%. Yet natural gas—a key U.S. export averaging 12.6 billion cubic feet daily—has surged 12.34% over the same period. If tariff-induced fear were a primary driver of commodity inflation, one would expect such heavily exported commodities to rise only modesty or remain unaffected. Similarly tariff-sensitive commodities should exhibit comparable gains to that of gold. But, they don’t.

Aluminum—a major import valued at roughly $27.4 billion annually. Although many analysts expect great things from this metal in 2025, since November 4, 2024 it has only inched up 1.23%. Meanwhile, consider steel billet prices, which have actually fallen by 5.89%. If any material were to be affected by investor fear of tariffs, it would be imported steel. Trump actually DID impose a tariff on streel imports during his first term in office. Other commodities, like silver and platinum, have recorded increases of 7.89% and 6.78%, respectively, in line with gold’s performance. Yet, the disparate performance, across these materials, highlights that the forces driving price movements are not uniform and cannot be solely attributed to a single tariff narrative.

A Shift Toward Physical Demand

The more compelling explanation for gold’s rising price lies in a fundamental market transformation: the increasing demand for physical gold versus paper-based claims. Reuters has documented how global bullion banks are actively flying gold into the United States from Asian hubs such as Dubai and Hong Kong in order to exploit unusually high premiums on U.S. futures contracts. This “exchange for physical” (EFP) process—which now commands premiums nearing $40 per troy ounce—is indicative of a broader trend. Institutional and individual investors are increasingly favoring physical delivery, a preference that has been building over years of advocacy by industry analysts and organizations. This transition toward tangible bullion reflects a desire to move away from paper representations of gold that, critics argue, overstate available supply.

Evidence Beyond Tariff Fears

While some observers point to Trump’s threats of imposing blanket tariffs on imports from Canada, Mexico, and on goods from China as proof of a tariff-driven surge in gold buying, the data suggest otherwise. In practice, key tariff targets remain largely unaffected by such threats. The real driver appears to be the market’s evolving structure. Investors are demanding more physical gold as a hedge against broader economic uncertainties, rather than as a direct reaction to tariff policies.

Conclusions and Investor Implications

The preoccupation with Trump’s tariffs as the catalyst for rising gold prices is, upon close examination, more of a distraction than a substantive explanation. The divergent price trends among commodities—where natural gas and silver have surged while aluminum and steel billets have shown minimal movement or declines—underline that the dynamics are more complex.

Investors should focus on the long‑term structural shifts in the bullion market, particularly the growing appetite for physical delivery of gold, which signals a genuine tightening of supply and a reevaluation of the “paper” gold market. The evidence suggests that many investors have decided that a strategic allocation to physical bullion might serve as a robust hedge in times of market uncertainty.

Rather than accepting the narrative built on tariff fears, investors should scrutinize the underlying supply–demand fundamentals and consider the dynamics of U.S. bullion markets. The London Financial Times has also reported on increasing speculation that the Trump administration intends to revalue the price of American gold reserves, in dollar terms. This would have the effect of relieving the US government’s overwhelming debt burden, and would make US exports more competitive. In other words, it would make US goods cheaper for foreigners and foreign goods more expensive for Americans. All this without the need for tariffs.

Ultimately, by concentrating on the deeper market transformation—marked by a shift toward physical asset demand rather than paper representations—investors can better position themselves to benefit from the genuine scarcity and value of gold, regardless of transient political rhetoric.

Opportunities:

Several opportunities emerge for investors to capitalize on the evolving dynamics of the gold market and broader commodity trends:

• Invest in Physical Gold: The growing demand for physical gold over paper-based claims presents a significant opportunity. With premiums on physical delivery rising (e.g., $40 per troy ounce in U.S. futures markets), investors can benefit from the tightening supply and increasing preference for tangible assets. Allocating to physical bullion could serve as a hedge against economic uncertainties and offer potential upside as this structural shift continues.

• Leverage Premium Dynamics in U.S. Bullion Markets: The high premiums in U.S. bullion markets, driven by the "exchange for physical" (EFP) process, provide opportunities for holders of wholesale quantities of gold to arbitrage their holdings, though at some risk of not being able to replace it. Investors with access to global bullion markets can exploit price differentials by sourcing gold from regions like Asia, where premiums are lower, and selling into U.S. markets.

• Diversify into Other Precious Metals: While gold has garnered attention, other precious metals like platinum has mirrored its rise (6.78%). Platinum is selling for historically low prices. It is expensive to mine and mining it is not particularly profitable at today’s prices. Above-ground supplies are very low. Ford Motor Company reported a loss of almost $5 billion this year and predicts a loss of $5 billion next year, on electric vehicles. Other automakers are also taking big losses. Most people don’t want the range restrictions of electric vehicles and won’t buy them. With Trump lifting severe EPA restrictions on fossil fuel vehicles, platinum demand will rise sharply against limited supplies. However, the white metal will not benefit from speculation that the Trump administration is poised to revalue the price of gold.

• Focus on Gold Mining shares: If large investors continue to demand physical deliveries, gold miners with solid reserves of metal will likely outperform. This, of course, is dependent upon the quality of management. Bad management of a mining company can insure that the stock doesn’t move up regardless of how well gold performs.

   

Note: Due to the shifting nature of detailed intra‑period commodity pricing, exact figures (such as the November 4 spot price of gold at US$2,734.36 vs. the price at the moment this article is read, which was 8.45% at the time of the writing) are best confirmed via current financial data services.

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