Gold rush: Virus has sparked round-the-clock race to fill vaults
Gold rush: Virus has sparked round-the-clock race to fill vaults By Elena Mazneva and Jack Farchy for WAtoday.com.au
The scramble to jump on one of the hottest gold trades in years – by shipping bullion to New York — has sparked what may be one of the largest ever physical transfers of the metal.
“The flows into New York are unprecedented,” said Allan Finn, global commodities director at logistics and security provider Malca-Amit. His company’s teams in New York have been working 24 hours a day to cope with demand while navigating lockdowns, flight disruptions and social distancing.
Gold flooded into the US in recent months as traders rushed to profit from an arbitrage caused by dislocations in the market triggered by the pandemic. Since late March, some 550 tonnes of gold – worth $US30 billion ($45 billion) at today’s price and roughly equal to global mine output in the period – have been added to Comex warehouse stockpiles. Hundreds of tonnes of that was imported.
While tens of billions of dollars of gold change hands every day in financial markets, a much smaller amount tends to physically move between vaults in trading hubs like London, Zurich and New York.
But that started to change as the COVID-19 crisis affected the supply chain. When planes were grounded and Swiss refineries closed in late March, traders were worried they wouldn’t be able to get gold to New York in time to deliver against futures contracts. That caused futures, which typically trade in lockstep with the London spot price, to soar to a premium of as much as $US70 an ounce.
That created an opportunity for enterprising traders: buy gold somewhere in the world at the spot price, sell futures, and benefit from the difference by shipping the metal to New York.