Joe Wallace

Who buys gold? So, you know, some of the biggest buyers of the past few years have been central banks. They buy gold, for example, in case they need to defend their local currencies. And if you have a big stockpile of gold, you can sell gold to buy your currency and support the currency. Then there's commercial companies like jewelry companies.

Who buys gold? So, you know, some of the biggest buyers of the past few years have been central banks. They buy gold, for example, in case they need to defend their local currencies. And if you have a big stockpile of gold, you can sell gold to buy your currency and support the currency. Then there's commercial companies like jewelry companies.

Tiffany will buy gold to make rings and earrings and necklaces, et cetera. And very, very wealthy people might own gold bars. There are gold bugs out there who buy gold as a kind of doomsday asset in case inflation rockets or there's a war or some other pestilence or plague.

Tiffany will buy gold to make rings and earrings and necklaces, et cetera. And very, very wealthy people might own gold bars. There are gold bugs out there who buy gold as a kind of doomsday asset in case inflation rockets or there's a war or some other pestilence or plague.

You know, some of the world's biggest financial institutions have huge gold businesses buying and selling gold or investing in gold companies and miners. They kind of sit at the center of the market and knit the whole thing together. So they might buy gold from a mine, sell it to a refiner in Switzerland, then sell it on to a client who wants to buy gold.

You know, some of the world's biggest financial institutions have huge gold businesses buying and selling gold or investing in gold companies and miners. They kind of sit at the center of the market and knit the whole thing together. So they might buy gold from a mine, sell it to a refiner in Switzerland, then sell it on to a client who wants to buy gold.

They're kind of at the center of the market.

They're kind of at the center of the market.

That's dating back to when Isaac Newton was head of the UK Mint. Wow, okay. London has been the physical gold market has revolved around London and specifically vaults, you know, far beneath the streets.

That's dating back to when Isaac Newton was head of the UK Mint. Wow, okay. London has been the physical gold market has revolved around London and specifically vaults, you know, far beneath the streets.

Yeah, that would be your first port of call.

Yeah, that would be your first port of call.

Since the 70s, there's been a very, very active financial market in gold, you know, financial contracts, derivative contracts in New York. And the banks that play such an important role in the gold market, they're constantly trading between the two locations, London and New York, London and New York.

Since the 70s, there's been a very, very active financial market in gold, you know, financial contracts, derivative contracts in New York. And the banks that play such an important role in the gold market, they're constantly trading between the two locations, London and New York, London and New York.

If you're JP Morgan and you own, I don't know, a billion dollars of gold in London, gold doesn't – it's not like a stock. You don't get a dividend. It's not a bond. You don't receive a coupon. It's a metal. It doesn't – you only gain money if the price rises. But you don't want to sit there with a massive – billion, $5 billion, $10 billion exposure, hoping the price of gold goes up.

If you're JP Morgan and you own, I don't know, a billion dollars of gold in London, gold doesn't – it's not like a stock. You don't get a dividend. It's not a bond. You don't receive a coupon. It's a metal. It doesn't – you only gain money if the price rises. But you don't want to sit there with a massive – billion, $5 billion, $10 billion exposure, hoping the price of gold goes up.

It may never go up. And in fact, the price might go down. And that's a big risk. If the price goes down, then you've lost a load of money. So handily, there's a way to offset that risk, which is by selling futures in New York. And that's called hedging. You're hedging your bets.

It may never go up. And in fact, the price might go down. And that's a big risk. If the price goes down, then you've lost a load of money. So handily, there's a way to offset that risk, which is by selling futures in New York. And that's called hedging. You're hedging your bets.

Many, many tons of gold are flying over the Atlantic in the cargo hold of passenger planes.

Many, many tons of gold are flying over the Atlantic in the cargo hold of passenger planes.

If you own gold bars in London and you've sold gold futures contracts in New York, you have two kind of mirror image trades. If the price of gold falls by 50%, you lose 50% on your position in London.

If you own gold bars in London and you've sold gold futures contracts in New York, you have two kind of mirror image trades. If the price of gold falls by 50%, you lose 50% on your position in London.

but you gain 50% on your position in New York because you sold at $2,500, the futures contract. And after that, the price of gold in the open market falls to 1,250. Your agreement to sell gold at 2,500 is suddenly incredibly valuable because that's worth, that's twice the value of gold in the market now. So in theory, you should be level, whatever happens in the market.

but you gain 50% on your position in New York because you sold at $2,500, the futures contract. And after that, the price of gold in the open market falls to 1,250. Your agreement to sell gold at 2,500 is suddenly incredibly valuable because that's worth, that's twice the value of gold in the market now. So in theory, you should be level, whatever happens in the market.

Bars, yeah, bars. Bars of gold.

Bars, yeah, bars. Bars of gold.

Exactly.

Exactly.

Yeah, precisely.

Yeah, precisely.

Pretty much, yeah. Assuming the London and the New York markets move pretty much in lockstep, which they mostly do, you're protected.

Pretty much, yeah. Assuming the London and the New York markets move pretty much in lockstep, which they mostly do, you're protected.

It's all to do with President Trump.

It's all to do with President Trump.

Before the election, Trump... mooted the possibility of putting a universal tariff on everything that the U.S. imports of 20%. And around the time of the election, people thought, hang on, what if that tariff is applied to gold?

Before the election, Trump... mooted the possibility of putting a universal tariff on everything that the U.S. imports of 20%. And around the time of the election, people thought, hang on, what if that tariff is applied to gold?

No, no, no. They would never tell you. Then you'd be a target, right, for some armed robbery and...

No, no, no. They would never tell you. Then you'd be a target, right, for some armed robbery and...

Today, it's so volatile, it's hard to keep track. But over the past few months, it's averaged about $20 more in New York than in London. It reached a high of about $50 or $60. Normally, that's like $2 or $3. So it's way, way higher than normal. And that's baking in a possible tariff at the U.S. border on gold.

Today, it's so volatile, it's hard to keep track. But over the past few months, it's averaged about $20 more in New York than in London. It reached a high of about $50 or $60. Normally, that's like $2 or $3. So it's way, way higher than normal. And that's baking in a possible tariff at the U.S. border on gold.

Suddenly they were losing a lot of money on their New York positions and they weren't gaining as much on their London positions. So if you're in that position, if you're a gold trader at a bank, you might get a knock on the door from your risk committee saying, hang on, on paper you're losing a lot of money here. What can we do about this?

Suddenly they were losing a lot of money on their New York positions and they weren't gaining as much on their London positions. So if you're in that position, if you're a gold trader at a bank, you might get a knock on the door from your risk committee saying, hang on, on paper you're losing a lot of money here. What can we do about this?

Excellent question. The limitation, I think, is financial. You can generally take up to five tons of gold, which is about half a billion dollars of gold on a flight. And that's because the insurers won't insure anything above that.

Excellent question. The limitation, I think, is financial. You can generally take up to five tons of gold, which is about half a billion dollars of gold on a flight. And that's because the insurers won't insure anything above that.

They're very secretive about what they never want to admit to the size of the positions or what they're possibly losing. But you hear, you know, in the market, you hear about hundreds of millions of dollars possibly. That's the worst case scenario.

They're very secretive about what they never want to admit to the size of the positions or what they're possibly losing. But you hear, you know, in the market, you hear about hundreds of millions of dollars possibly. That's the worst case scenario.

It's much cheaper to get out of the loss making trade by sticking gold in the plane, getting it over to New York and handing it to the person who owns the futures contract.

It's much cheaper to get out of the loss making trade by sticking gold in the plane, getting it over to New York and handing it to the person who owns the futures contract.

There are plenty of private vaults in London, but by far the biggest stash of gold is at the Bank of England.

There are plenty of private vaults in London, but by far the biggest stash of gold is at the Bank of England.

It's a lot. Yeah, it's a lot of gold.

It's a lot. Yeah, it's a lot of gold.

Most of that is owned by overseas central banks, but also by commercial banks.

Most of that is owned by overseas central banks, but also by commercial banks.

Exactly. Although right now, think of a couple of overworked, harried forklift drivers rather than goblins.

Exactly. Although right now, think of a couple of overworked, harried forklift drivers rather than goblins.

A huge, long queue developed to get gold out, and by all accounts, the people manning the vaults were struggling to meet demand, and that's partly for a slightly quirky reason. If you own gold at the Bank of England, you have a claim on a specific bar, so the same bar that you put in has to come out.

A huge, long queue developed to get gold out, and by all accounts, the people manning the vaults were struggling to meet demand, and that's partly for a slightly quirky reason. If you own gold at the Bank of England, you have a claim on a specific bar, so the same bar that you put in has to come out.

And that means that the people who run the vaults have to go in and find your specific bar on... Your bar?

And that means that the people who run the vaults have to go in and find your specific bar on... Your bar?

Or, like, a serial number? No, yeah, I don't actually know how they identify it. Joe's gold, like... Exactly, yeah, yeah.

Or, like, a serial number? No, yeah, I don't actually know how they identify it. Joe's gold, like... Exactly, yeah, yeah.

So if you needed that gold to get out of your trade, you're toast and you have to eat the loss.

So if you needed that gold to get out of your trade, you're toast and you have to eat the loss.

The New York Exchange, it accepts a different size of bar to the bars which trade in London.

The New York Exchange, it accepts a different size of bar to the bars which trade in London.

Exactly. This isn't the system you would design on paper if you were inventing the market today, but you have to resize them. So the refinery, well, three main refineries, and they'll melt the bars down and just recast them into the right size of bar that you can send over into New York.

Exactly. This isn't the system you would design on paper if you were inventing the market today, but you have to resize them. So the refinery, well, three main refineries, and they'll melt the bars down and just recast them into the right size of bar that you can send over into New York.

You'll hire one of the few security companies that specialize in moving very high-value goods, and they take gold in kind of secure vans over to the airport, and then it goes into the hold of a commercial plane. And then on the other side in New York, the same thing happens. It goes in a van across town into a vault.

You'll hire one of the few security companies that specialize in moving very high-value goods, and they take gold in kind of secure vans over to the airport, and then it goes into the hold of a commercial plane. And then on the other side in New York, the same thing happens. It goes in a van across town into a vault.

We don't know who, you know, there are all sorts of rumors in the market about who might have lost money. But given the amount of gold that has flown over over the past few months, you have to assume that a lot of banks were pretty successful in getting out of those loss-making trades.

We don't know who, you know, there are all sorts of rumors in the market about who might have lost money. But given the amount of gold that has flown over over the past few months, you have to assume that a lot of banks were pretty successful in getting out of those loss-making trades.

Once you've got out of those loss-making trades, you then have a great chance to make a load of money because suddenly gold is much cheaper in London than New York. So you put on a new trade. You buy more gold in London and you lock in a much higher price in New York. And provided you know, if you know you can get the gold over, it's almost free money.

Once you've got out of those loss-making trades, you then have a great chance to make a load of money because suddenly gold is much cheaper in London than New York. So you put on a new trade. You buy more gold in London and you lock in a much higher price in New York. And provided you know, if you know you can get the gold over, it's almost free money.

Exactly. It's a classic arbitrage. There's a higher price in one market than another, and you make good money.

Exactly. It's a classic arbitrage. There's a higher price in one market than another, and you make good money.

Who buys gold? So, you know, some of the biggest buyers of the past few years have been central banks. They buy gold, for example, in case they need to defend their local currencies. And if you have a big stockpile of gold, you can sell gold to buy your currency and support the currency. Then there's commercial companies like jewelry companies.

Tiffany will buy gold to make rings and earrings and necklaces, et cetera. And very, very wealthy people might own gold bars. There are gold bugs out there who buy gold as a kind of doomsday asset in case inflation rockets or there's a war or some other pestilence or plague.

You know, some of the world's biggest financial institutions have huge gold businesses buying and selling gold or investing in gold companies and miners. They kind of sit at the center of the market and knit the whole thing together. So they might buy gold from a mine, sell it to a refiner in Switzerland, then sell it on to a client who wants to buy gold.

They're kind of at the center of the market.

That's dating back to when Isaac Newton was head of the UK Mint. Wow, okay. London has been the physical gold market has revolved around London and specifically vaults, you know, far beneath the streets.

Yeah, that would be your first port of call.

Since the 70s, there's been a very, very active financial market in gold, you know, financial contracts, derivative contracts in New York. And the banks that play such an important role in the gold market, they're constantly trading between the two locations, London and New York, London and New York.

If you're JP Morgan and you own, I don't know, a billion dollars of gold in London, gold doesn't – it's not like a stock. You don't get a dividend. It's not a bond. You don't receive a coupon. It's a metal. It doesn't – you only gain money if the price rises. But you don't want to sit there with a massive – billion, $5 billion, $10 billion exposure, hoping the price of gold goes up.

It may never go up. And in fact, the price might go down. And that's a big risk. If the price goes down, then you've lost a load of money. So handily, there's a way to offset that risk, which is by selling futures in New York. And that's called hedging. You're hedging your bets.

Many, many tons of gold are flying over the Atlantic in the cargo hold of passenger planes.

If you own gold bars in London and you've sold gold futures contracts in New York, you have two kind of mirror image trades. If the price of gold falls by 50%, you lose 50% on your position in London.

but you gain 50% on your position in New York because you sold at $2,500, the futures contract. And after that, the price of gold in the open market falls to 1,250. Your agreement to sell gold at 2,500 is suddenly incredibly valuable because that's worth, that's twice the value of gold in the market now. So in theory, you should be level, whatever happens in the market.

Bars, yeah, bars. Bars of gold.

Exactly.

Yeah, precisely.

Pretty much, yeah. Assuming the London and the New York markets move pretty much in lockstep, which they mostly do, you're protected.

It's all to do with President Trump.

Before the election, Trump... mooted the possibility of putting a universal tariff on everything that the U.S. imports of 20%. And around the time of the election, people thought, hang on, what if that tariff is applied to gold?

No, no, no. They would never tell you. Then you'd be a target, right, for some armed robbery and...

Today, it's so volatile, it's hard to keep track. But over the past few months, it's averaged about $20 more in New York than in London. It reached a high of about $50 or $60. Normally, that's like $2 or $3. So it's way, way higher than normal. And that's baking in a possible tariff at the U.S. border on gold.

Suddenly they were losing a lot of money on their New York positions and they weren't gaining as much on their London positions. So if you're in that position, if you're a gold trader at a bank, you might get a knock on the door from your risk committee saying, hang on, on paper you're losing a lot of money here. What can we do about this?

Excellent question. The limitation, I think, is financial. You can generally take up to five tons of gold, which is about half a billion dollars of gold on a flight. And that's because the insurers won't insure anything above that.

They're very secretive about what they never want to admit to the size of the positions or what they're possibly losing. But you hear, you know, in the market, you hear about hundreds of millions of dollars possibly. That's the worst case scenario.

It's much cheaper to get out of the loss making trade by sticking gold in the plane, getting it over to New York and handing it to the person who owns the futures contract.

There are plenty of private vaults in London, but by far the biggest stash of gold is at the Bank of England.

It's a lot. Yeah, it's a lot of gold.

Most of that is owned by overseas central banks, but also by commercial banks.

Exactly. Although right now, think of a couple of overworked, harried forklift drivers rather than goblins.

A huge, long queue developed to get gold out, and by all accounts, the people manning the vaults were struggling to meet demand, and that's partly for a slightly quirky reason. If you own gold at the Bank of England, you have a claim on a specific bar, so the same bar that you put in has to come out.

And that means that the people who run the vaults have to go in and find your specific bar on... Your bar?

Or, like, a serial number? No, yeah, I don't actually know how they identify it. Joe's gold, like... Exactly, yeah, yeah.

So if you needed that gold to get out of your trade, you're toast and you have to eat the loss.

The New York Exchange, it accepts a different size of bar to the bars which trade in London.

Exactly. This isn't the system you would design on paper if you were inventing the market today, but you have to resize them. So the refinery, well, three main refineries, and they'll melt the bars down and just recast them into the right size of bar that you can send over into New York.

You'll hire one of the few security companies that specialize in moving very high-value goods, and they take gold in kind of secure vans over to the airport, and then it goes into the hold of a commercial plane. And then on the other side in New York, the same thing happens. It goes in a van across town into a vault.

We don't know who, you know, there are all sorts of rumors in the market about who might have lost money. But given the amount of gold that has flown over over the past few months, you have to assume that a lot of banks were pretty successful in getting out of those loss-making trades.

Once you've got out of those loss-making trades, you then have a great chance to make a load of money because suddenly gold is much cheaper in London than New York. So you put on a new trade. You buy more gold in London and you lock in a much higher price in New York. And provided you know, if you know you can get the gold over, it's almost free money.

Exactly. It's a classic arbitrage. There's a higher price in one market than another, and you make good money.

They're on day 37 of this 90-day pause. And from the EU's perspective, the kind of deal that the UK and China settled for is not something that they would be happy with. In both cases, tariffs have been left significantly higher than they were before Trump came in. And the EU seems sort of determined to get a sort of rollback.

They're on day 37 of this 90-day pause. And from the EU's perspective, the kind of deal that the UK and China settled for is not something that they would be happy with. In both cases, tariffs have been left significantly higher than they were before Trump came in. And the EU seems sort of determined to get a sort of rollback.

So eliminating all tariffs on goods moving between these two huge economies. And some EU officials are even saying that, you know, if the final US offer was a 10% tariff, which is where we are now, that they would have to retaliate.

So eliminating all tariffs on goods moving between these two huge economies. And some EU officials are even saying that, you know, if the final US offer was a 10% tariff, which is where we are now, that they would have to retaliate.