In the latest edition of Dr. Polleit’s BOOM & BUST REPORT (6th Feb ’25) I addressed the issue of U.S. import tariffs and its impact on the gold price—because I’ve been quite surprised by the immense impact U.S. President Donald Trump’s tariff agenda is already having on the global gold market.
To set the ball rolling, let me remind you that the gold price is in true bull market, reaching new heights. Currently, it’s trading around 2,850 USD per ounce, just slightly below the all-time high of 2,883 dollars—a rise of about 40 per cent from last year.
And the price of gold is not just increasing in US dollars, but in all major fiat currencies of the world. In other words, fiat currencies are dramatically losing value against gold—this is precisely what a rising gold price means: you can buy less gold with fiat money.
There are certainly many reasons behind the enormous rise in the price of gold across all major currencies. One significant reason, in my view, is that fiat currencies like the U.S. dollar, the euro and others are increasingly losing credibility.
As a result, investors are increasingly turning to gold and silver as a store of value, seeking to protect their portfolios from inflation and credit default risks by holding especially the yellow metal.
However, one factor that has played a crucial role for the more recent price dynamics in the world gold market is the expectation that the Trump administration could impose import tariffs on gold and silver.
Goods shipped from Mexico, Canada, and China to the US are already subject to U.S. import tariffs. This, however, may not necessarily result in higher cost for gold and silver entering the U.S.—after all, U.S. buyers can still source gold and silver from other regions of the world without facing tariffs.
But concerns about a general import tariff on gold and silver is already making waves in the precious metal markets.
Bloomberg News reported on January 31st that the U.S. investment bank JP Morgan plans to transport physical gold worth 4 billion U.S. dollar from abroad to New York to prepare for fulfilling gold derivative contracts due in February. This move is likely a response to the potential scenario where the Trump administration imposes tariffs on gold and silver (a tariff so significant that it would justify transporting physical silver, which is typically delivered by ship, by plane instead).
And it’s no surprise that U.S. investors, fearing such import tariffs, are now increasing their demand for gold and silver.
It’s also not surprising that physical deliveries of gold from derivative trades at the COMEX (which, with a daily turnover of 70 billion U.S. dollar, ranks second in the world after London’s 125 billion U.S. dollar) have reached exceptional levels. In February, COMEX is set to deliver 4 million ounces of gold from futures contracts, a sharp increase from 2.9 million in January, and for March, nearly 4.5 million ounces of gold are scheduled for delivery.
The high demand for deliveries can be seen as a sign of increased tension in the market for physical gold, but particularly in the "paper gold market." Both point to a clear and significant preference for physical material among investors.
No question about it: The physical gold market is now in motion. The British press reported that substantial gold reserves have already been moved from London to the U.S. (or at least set aside in London for eventual transfer). Reports indicate that the delivery times for gold stored in London (with the majority held in vaults at the Bank of England) are increasing significantly—from a few days to several weeks in some cases.
In New York, gold is already trading at a premium over the price in London—which also provides an incentive to buy gold in London and sell it (and probably deposit it) in the U.S.
In fact, there’s talk of material shortages. The lending fees for gold and silver ETFs have skyrocketed. The reason for this is that these securities are accepted as collateral for, say, gold futures positions, and when physical material is especially scarce, demand for gold and silver ETFs rises—dramatically in this case.
It’s becoming clear that a U.S. import tariff on gold and silver would effectively fragment the global precious metals market. That is not good news.
The physical gold and silver already in the U.S., and that traded or delivered via futures, options, and forward contracts in the U.S., would of course be exempt from any import tariffs.
However, gold and silver imported into the U.S. from abroad would increase in price beyond the world market price, due to the tariff.
If private gold buyers in the U.S. expect import tariffs on gold and silver, they have an incentive to bring forward their purchases to avoid the tariff.
In particular, the COMEX would have a strong incentive to stock up on its gold reserves proactively—not only to potentially meet higher physical delivery demands but also to ensure a cost-effective expansion of future trading volumes (which would be accompanied by increased demand for physical delivery material and higher stockpiles).
If the rising physical inventory of gold and silver at the COMEX becomes more expensive, this would, of course, have an upward effect on the price of gold (and silver) that would be felt worldwide.
Simply put, because owners of physical gold in the U.S. would likely only sell at a price that matches the world market price, plus a premium (related to the U.S. gold import tariff).
The worldwide availability of physical gold (and silver) would be negatively impacted by a U.S. import tariff on gold, reducing liquidity in the global gold market.
Long-term, the question would arise whether the gold derivatives market, which involves physical delivery, might shift to regions of the world where no import tariffs or any taxes on gold and silver are levied—or whether gold trading could potentially move entirely to the U.S.
But for now, there has not been a general U.S. import tariff on gold and silver, and it’s possible that precious metals could even be exempt from any such policy. That said, investors cannot be sure that the gold price increase, as far as it is driven by investor concern about a forthcoming import tariff, may not prove to be permanent. In other words, a gold price correction can’t be ruled out, especially after the massive price increase in the last 12 months.
However, there is also a non-negligible chance that the opposite happens. For something truly major might occur, which would not be entirely surprising—after all, the world is, in a sense, in upheaval. So, what am I getting at? I am referring to the sustainability of the absurdly inflated paper gold market going forward.
The turnover in the global paper gold market (referring to transactions primarily in gold derivatives) has reached extraordinarily high, even grotesque levels. In January 2025, the daily turnover in spot and futures markets was about 264 billion U.S. dollar. That means, on any given day, about 80 per cent of the market value of annual gold production was traded.
It appears that the paper gold market has de facto decoupled from the physical market, distorting the entire market for gold. Especially so as for many investors, gold futures, options, certificates and gold ETFs have become almost equivalent to physical gold.
This is why the physical gold market has become pyramided: Above the physical gold base, a truly gigantic volume of gold trading has been piled up, made possible using financial, or: paper gold, instruments.
However, if investors suddenly change their mind and go for physical material (potentially triggered by a U.S. import tariff on gold, or loss of confidence in the viability of the paper gold market), things could get truly turbulent.
In the extreme, the entire inflated paper gold market bubble could come crashing down, dissolve into thin air, with unpredictable consequences—except for the certainty that investors would regret not having gold coins and bars and only holding paper gold in their portfolios.
Nevertheless, there’s no need to predict a grand awakening of investors or the bursting of the paper gold bubble to find reasons why the upward pressure on the price of gold and silver should continue long-term—driven by fundamental factors. And one key reason, which I mentioned earlier, is that fiat currencies are increasingly losing credibility: Investors are turning to gold as a store of value, protecting their portfolios from inflation and default risks by holding gold and silver.
To learn more about how investors should position themselves now, please read Dr. Polleit’s BOOM & BUST REPORT—providing real insights for investors who truly want to understand what’s going on, and how to invest wisely.
