Last week, JPMorgan announced plans to move $4 billion in physical gold from London to New York to fulfill futures contracts. The move is part of a broader trend in which major players in the gold market are asking central banks to lend gold stored in London to meet growing demand for the physical metal.
Gold and silver futures prices on the COMEX have risen above the spot price in London, creating arbitrage opportunities for financial institutions. JPMorgan, along with Deutsche Bank, Morgan Stanley and Goldman Sachs, issued notices to deliver millions of ounces of gold to fulfill futures contracts.
This dynamic is emptying London's gold and silver vaults at an unusually rapid pace, which could lead to price dislocations in the London market. In addition, the waiting time to get gold out of the Bank of England's vaults has increased significantly due to high demand.
If this trend continues, it could put additional upward pressure on gold and silver prices.
Mike Maharrey, Money Metals