Unravelling the Forces Shaping the Global Precious Metals Market

In a recent roundtable discussion, BullionStar’s Claudia Merkert sat down with two of the most respected voices in the precious metals industry: Eric Yeung, a global macro strategist, and Ronan Manly, a renowned precious metals analyst. Together, they explored the latest trends in the gold market, including the unprecedented movement of physical gold into the U.S., the growing rift between paper and physical gold markets, and the broader implications of economic and geopolitical developments on gold’s future.

The Surge in Physical Gold Transfers: Unprecedented Market Movements

One of the most pressing topics in the conversation was the massive influx of gold into the U.S. market. Over the past two months, an estimated 2,000 metric tonnes of gold have moved from major global gold hubs—such as London, Switzerland, Singapore, and Australia—into U.S. markets. Of this, nearly 700 metric tonnes have been transferred to the COMEX, with the remaining 1,300 metric tonnes believed to have been absorbed through over-the-counter (OTC) markets. This movement raises significant questions about the motivations behind such large-scale transfers.

Eric and Ronan emphasized that this shift is far from just commercial. The scale and speed of the gold inflows suggest the involvement of a powerful entity—likely one with considerable political and financial influence—that is actively repatriating gold. This theory gains further credence following statements from the CEO of StoneX, one of the world’s largest commodity traders, who confirmed these numbers on several occasions.

Paper vs. Physical Gold: The Growing Discrepancy

Another central topic discussed was the widening gap between the price of physical gold and its paper counterpart. While the LBMA (London Bullion Market Association) and COMEX have long been key players in the gold market, their roles are increasingly being called into question. Historically, the COMEX was seen as a price discovery mechanism, but now it is clear that the growing demand for physical gold is highlighting deeper liquidity issues in the LBMA’s unallocated gold system.

According to Ronan, the increased demand for physical delivery from COMEX signals deeper liquidity concerns within the LBMA’s unallocated gold system. This has led to a rise in gold lease rates and extended delivery times, with Eric pointing out that some orders are stretching from a typical T+2 settlement timeframe to as long as T+60 at present.

Eric likened the LBMA system to a “paper gold fire brigade” that relies on a thin layer of physical reserves to control market fluctuations. However, as demand intensifies, this mechanism is becoming increasingly fragile, raising concerns about the sustainability of the paper gold market and potential systemic risks.

The Role of COMEX Vaults – A Potential Trap?

The role of COMEX vaults in gold trading also came under scrutiny. There is growing suspicion that the gold moving into COMEX vaults is being funnelled into the U.S. financial system, potentially limiting its free trade. Eric raised the possibility that this could be part of a broader strategy to implement capital controls on gold, similar to the approach taken by China to keep capital within its borders. He also believes that the U.S. could restrict gold withdrawals in times of economic crisis, drawing from historical precedents.

Ronan pointed out that the COMEX is deeply tied to major U.S. institutions, such as the CME (Chicago Mercantile Exchange) and Wall Street banks, as well as government entities like the CFTC (Commodity Futures Trading Commission) and the President’s Working Group on Financial Markets. While the COMEX was never historically a major gold delivery hub compared to London, its role has expanded significantly. Ronan suggested that this shift might not just be about market arbitrage but could be part of a deeper, strategic manoeuvre.

Trump’s Tariff Policies and Their Impact on Global Gold Trade

The discussion also touched on the influence of Donald Trump’s tariff policies on the global trade of gold. Trump’s past threats to impose tariffs on precious metals have led many to speculate that investors and institutions are pre-emptively securing physical gold in anticipation of future trade restrictions. Eric noted that the broader economic policies aimed at bringing industries back to the U.S. could accelerate de-dollarization trends, particularly among BRICS nations and other trade blocs.

Ronan suggested that tariff threats are often used as a negotiating tool rather than a concrete policy shift. However, in this case, these threats could be prompting non-Western nations to move away from dollar-denominated trade and consider alternative settlement mechanisms—some of which may be backed by gold.

Gold-Backed Bonds: A Potential U.S. Strategy?

Another intriguing topic discussed was the idea of the U.S. issuing gold-backed treasury bonds. Eric cited Judy Shelton, an economic advisor with close ties to the Trump administration. She has proposed auditing the U.S. gold reserves, revaluing U.S. gold reserves at market prices and issuing 50-year zero-coupon gold-backed bonds. It is theorised that this move could help stabilize U.S. debt over the long term while maintaining confidence in the dollar.

Ronan suggested that the feasibility of such a move depends on the authenticity of U.S. gold holdings, and that although the government claims to hold 261 million ounces of gold, questions remain about whether all of it is physically available. If the U.S. needs to replenish its reserves to back such bonds, the ongoing gold inflows into the U.S. could be a preparatory step for a broader financial restructuring.

China’s Strategic Gold Accumulation

China’s growing demand for gold was a key point of the discussion. Eric noted that the country has been aggressively accumulating gold through various channels, including the Shanghai Gold Exchange and a newly launched Gold Accumulate Program, which allows citizens to convert yuan into gold-backed accounts. His estimates suggest that civilian gold demand in China alone could reach 2,000 metric tonnes in 2025—excluding the considerable acquisitions made by the People’s Bank of China. This reinforces the notion of gold as a strategic asset, both in global trade and monetary policy.

Are We Approaching a Bullion Crisis?

As physical gold demand continues to rise and paper gold markets show increasing signs of strain, the possibility of a bullion crisis looms large. If LBMA settlement times extend further and unallocated gold contracts face growing scepticism, the credibility of the paper gold system may erode significantly.

Eric pointed out that if the LBMA’s delays continue to lengthen, its promissory notes will likely face increasing devaluation, pushing investors towards more secure physical assets. Meanwhile, Ronan emphasised that the market is witnessing the early stages of a significant structural shift, where physical gold’s role in global finance may be reasserted.

Conclusion: Gold’s Evolving Role in the Global Economy

The insights shared in this discussion highlight the ongoing transformation in the gold market. With a surge in physical demand, increased government interventions, and shifting global trade policies, gold is poised to play a more significant role in the financial system in the years ahead.

As uncertainty persists, investors and policymakers alike must stay vigilant and assess how these macroeconomic and geopolitical trends will shape the future of precious metals. Whether through the potential issuance of gold-backed bonds, China’s continued accumulation, or a potential restructuring of global gold markets, one thing remains clear: gold’s relevance in the global monetary system is stronger than ever.

Stay tuned for more detailed analyses as these developments continue to unfold.