(Kitco News) - Is there a global gold shortage brewing? Why is gold flooding out of London and into the U.S.? What's really behind gold shattering its record highs? Josh Phair, CEO of Scottsdale Mint, explains the dramatic changes happening in the gold market, spurred by tariff concerns, potential policy shifts, and increasing geopolitical tensions.
In a recent interview, Phair highlighted significant movements in the gold and silver markets, noting a growing demand for physical metals in the United States and around the world.
Tariff fears fueling gold shipments
Concerns over potential tariffs under a second Trump administration are driving investors to move their gold stateside. "The goal was to get all the metal stateside," Phair told Kitco News, noting that banks are trying to minimize risk by ensuring their holdings are within U.S. borders.
This has led to a surge in gold shipments to New York's COMEX exchange, with inventories up nearly 75% since the U.S. election.
London's gold market under pressure
The increased demand for gold in the U.S. has strained London's gold market, with withdrawal wait times at the Bank of England skyrocketing. According to Phair, "There seems to be an even greater demand here, almost like is there an unseen hand of somebody wants a lot of gold and silver in the United States."
This situation has raised concerns about potential delays and shortages in London.
Unseen forces and potential audits
Speculation is rife about who might be behind the increased demand for physical gold in the U.S.
Phair suggested that a new administration might want to conduct a gold audit of U.S. reserves. "Maybe... someone gets the heads up that they need to make sure there's an audit, and they want more material here?"
He also noted that key figures like Treasury Secretary Scott Bessent might favor a larger role for gold in monetary policy.
Global rebalancing act
The demand for gold isn't limited to the U.S.; BRICS nations are also accumulating significant gold reserves. "Is this just the U.S. wanting to make sure that they maintain the top place, the top holding for gold?" Phair questioned, pointing out that the focus has shifted from Bitcoin back to physical gold.
Despite the surge in gold prices, retail investor demand has been subdued. Phair believes this is due to distractions and limited discretionary income.
However, he anticipates that retail investors will eventually return to the market as they become aware of the ongoing shifts. "Wait till people figure out what's going on," he said.
Gold and silver lease rates have surged, signaling a tightening market for physical metals. "Normally a bank... they'll own their gold, but they might lease it out to someone to use it for a short amount of time... But right now, they want it," Phair explained. This increase is driven by the profitability of delivering gold to the Comex exchange.
The potential imposition of tariffs on gold raises questions about the future of gold trading. While some believe gold is exempt due to its status as a monetary metal, Phair noted that banks are acting as if tariffs are a real possibility.
Individual states in the U.S. are also exploring ways to incorporate gold into their financial systems. "There are more than a dozen states right now with bills about buying gold," he noted, highlighting a potential new wave of gold buyers.
Phair emphasized the rapid pace of change in the market and the difficulty consumers face in keeping up. "I've never seen anything quite like this," he admitted, predicting an explosive decade ahead.
Silver's potential
Phair also highlighted the potential for silver, noting that it has a significant upside due to its industrial uses and growing deficits. "Silver's got a lot of opportunity to do really good this decade," he stated, predicting increased demand as consumers realize its value.
Central banks, particularly those in BRICS nations, may also consider adding silver to their reserves. Phair pointed to a Russian draft budget report for 2025 that included silver, suggesting a broader interest in diversifying into precious metals.
