London gold market queues up to borrow central bank gold after big shipments to US, sources say

By Polina Devitt

LONDON (Reuters) - London bullion market players are racing to borrow gold from central banks, which store bullion in London, following a surge in gold deliveries to the United States on speculation of potential import tariffs there, two sources familiar with the matter said.

The minimum waiting time to load gold out of the Bank of England, which stores gold for central banks, has reached four weeks, one of the sources said. In normal times, the release time is a few days or a week.

The BoE declined to comment.

New U.S. President Donald Trump has not mentioned precious metals in his tariff plans, but the risk has been enough to boost gold deliveries to New York as part of the market sought to hedge its positions on the U.S. COMEX exchange and part sought to benefit from a jump in the price premium of COMEX futures over London spot prices.

London is home to the world's largest over-the-counter gold trading hub, where market players trade directly with each other rather than via an exchange.

"The key with the BoE is that they are not a commercial vault so not prepared to handle the onslaught of gold borrowing banks are requesting from the central banks," said Robert Gottlieb, an industry expert and former head of precious metals at Koch Supply and Trading.

The size of so-called Loco London free float - the amount of gold readily available to the London OTC market stored in London - has fallen after the jump in supplies to New York.

Over the last two months, 12.2 million troy ounces of gold were delivered to COMEX-approved warehouses, raising stocks there by 70% to 29.8 million ounces, the highest since August 2022.

Deliveries to the U.S. left less free float metal in London vaults - the metal that is not owned by central banks or holdings of physically-backed gold exchange-traded funds. This in turn boosted demand from players in London who are ready to lease their gold and make it available to the OTC market.

Liquidity challenges in other large trading hubs are less pronounced than in London, but are being felt globally, said Alexander Zumpfe, a precious metals trader at Heraeus Metals.

"The logistical complexities of moving large quantities of gold, particularly from Europe to the U.S., are amplifying these stresses. Asia has also seen some knock-on effects, particularly in markets like Singapore and Hong Kong," Zumpfe added.

(Reporting by Polina Devitt. Additional reporting by Pratima Desai. Editing by Mark Potter)