New York Gold Futures Spike Over Spot Price After Tariff Shock

(Bloomberg) — The premium for gold futures in New York over the London spot price jumped after the Financial Times reported that US imports of one-kilogram bullion bars are now subject to tariffs.

Contracts for December delivery — the most actively traded contract — soared as markets opened in Asia on Friday, with their premium over spot climbing to more than $125 an ounce before easing to around $101 as of 8:01 a.m. in London. The magnitude of the divergence is unusual and mirrors a similar blowout earlier this year when fears over potential US tariffs created large price dislocations.

New York futures typically trade in lockstep with the London spot price. Gold in New York surged to an all-time high at $3,534.10 an ounce before paring some gains. Prices in London were little changed at $3,396.04.

One-kilo and 100-ounce gold bars — which are deliverable against the majority of contracts traded on the Comex in New York — should be classified under a customs code subject to levies, rather than in a tariff-free category, according to a July 31 letter from the US Customs and Border Protection agency seen by the FT.

The news raised uncertainty about the status of gold in President Donald Trump’s sweeping tariff agenda. His administration had exempted the precious metal from duties back in April, causing the futures premium to collapse at the time and ending a massive arbitrage trade that pulled nearly 850 tons of bullion into New York warehouses as traders raced to capitalize on large price differences.

There is widespread confusion over whether the latest customs apply to imports from Switzerland, which has so far failed to clinch a trade deal with the US, or to all imports of one-kilo bars, said David Wilson, senior commodities strategist at BNP Paribas SA. Managers at two major refineries in Asia, who did not want be named discussing sensitive information, are pausing all shipments to US until there is more clarity.

“People I’ve been speaking to feel that this is an error on the CBP’s part, that they’re misclassifying gold.” But “if this is correct, this is quite a dramatic change,” he said.

The US imports large volumes of gold from Switzerland, the world’s biggest gold-refining hub. where 400 ounce bars are recast into smaller 1-kilogram ingots that can be delivered against futures contracts on the Comex exchange in New York via the “exchange for physical” mechanism or EFP.

The risk that tariffs might now apply to those products means “there’s been an effort to get more metal into the US to back EFP positions,” Wilson said. “That’s why EFPs have exploded, and I suspect that’s also been — among other things — gold-supportive,” he added. “It throws quite a significant spanner in the works of the gold market and for those brokers and banks running EFPs and needing gold in US vaults.”

–With assistance from Yvonne Yue Li and Atul Prakash.

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