Mainstream vs Insurgent Views of Gold and Silver Flows to the U.S. Diverge Sharply
We compare and contrast two very divergent views on the primary drivers of the unprecedented delivery of physical gold and silver to the U.S.
A notable divergence exists between the institutional, mostly London-centric view of the gold market and a contrarian U.S.-centric “insurgent” view.
The gold and silver markets continue to be roiled by record transfers of physical metal to the US, mainly from London, but including supplementary transfers from all over the world. You can sum it up best with this chart:
The two dominant and contrasting positions on recent metal flows are:
Mainstream: driven by investor demand adjustments spurred by President Trump's tariff threats and post-election uncertainty, with central bank buying and geopolitical risks as secondary supports.
The World Gold Council's Unearthed Podcast represents the mainstream view: https://www.gold.org/goldhub/gold-focus/2025/02/unearthed-u.s.-politics-economics-and-gold-markets-look-ahead-ft-robert
Insurgent: driven by Basel III, DOGE audits, and the US sovereign wealth fund announced by the Trump administration. The insurgents suggest that there is a deliberate "play" to drain gold from London's vaults.
Gold, Guns, and Goats (language warning) represent the insurgent view:
A podcast is a challenging environment to provide empirical data to back up specific statements, so both views have some gaps.
Mainstream View: Most Important Issues
Uncertainty as a Driver: Gold transfers to the US increased due to tariff and fiscal uncertainty under Trump, supporting its safe-haven role despite rising yields and dollar strength.
Global Demand Dynamics: Central banks and Asian investors (1,000 tons annually) drive gold demand, with US transfers reflecting private holdings, not government action.
Tariff-Induced Rebalancing: Tariff threats boost US gold imports as investors hedge inflation and trade risks, aligning with market rebalancing.
Fiscal and Bond Market Risks: Potential deficit concerns enhance gold's appeal as a bond alternative, increasing private U.S. inflows.
US vs. Global Split: Strong US growth contrasts global weakness, with US flows tied to global demand patterns, not U.S.-specific accumulation.
Emotional/Strategic Role: Gold's dual appeal sustains US investor allocations, contributing to ongoing transfers without aggressive buying.
Moderated Outlook: A less bullish 2025 suggests current US gold flows are a temporary hedge, not a structural shift.
Insurgent View: Most Important Issues
LBMA Collapse: The LBMA's paper market is failing, driving physical gold transfers to the US via COMEX as London struggles to deliver.
US Repatriation: The US, likely via the Federal Reserve in concert with JPMorgan, is amassing gold (700 tons in three months) for Basel III, audits, and a sovereign wealth fund, exceeding official reserves.
Geopolitical Shift: Public draining of the LBMA humiliates London, signaling US dominance in gold markets and a break from European influence.
Financial Recapitalization: Gold revaluation and sovereign wealth fund strategies (e.g., gold bonds, sinking fund, housing equity swaps) rely on increased US gold holdings.
Global Demand Surge: Rising U.S. and Chinese demand (600 tons/year from China alone) may push gold prices toward $4,000/oz, with COMEX leading pricing.
New Monetary Framework: Gold underpins a nationalist US financial system, supporting a two-tier dollar and global trade stability in a "Bretton Woods III" reset for the world.
Mainstream View: Unpacked
Uncertainty Driving Gold Demand
A steepening US Treasury yield curve post-election, with long-term yields (10- and 30-year) rising sharply due to Trump's policies. The rising yields are linked with higher US growth expectations or increased uncertainty (e.g., tariffs, fiscal policy), not inflation fears, as break-even rates remain stable.
Despite rising yields and a stronger dollar—typically bearish for gold—prices have held steady at $2,700/oz (as of recording), signaling heightened uncertainty. John Reade suggests this resilience reflects gold's role as a hedge against unpredictable policy shifts.
Gold bullion transfers to the US will likely increase as investors seek safety amid tariff and fiscal uncertainty, aligning with a private demand surge rather than government action.
Central Bank and Emerging Market Buying
Reade highlighted a structural shift in gold demand, with central banks (especially emerging markets) boosting purchases from 500 to 1,000 tons annually in a 5,000-ton market, accounting for much of the recent rally. Eastern investors (China, India, Japan) drive ETF inflows, while Western investors remain sidelined but don't sell, particularly in the US.
Global demand, not U.S.-specific buying, underpins gold's strength. US investors maintain allocations for portfolio stability, not aggressive accumulation.
Transfers to the US reflect private investor holdings and global flows transiting through US markets, not a coordinated US repatriation effort, with stable US reserves (implied, not quantified here).
Tariff Policies and Economic Implications
Trump's tariff threats (25% on Canada/Mexico, 10% on China) are a focal point, raising fears of inflation and trade disruptions. Armstrong noted tariffs could cause a one-time price bump, not sustained inflation, with the market's pricing in known impacts (e.g., homebuilding stocks dip).
Gold's resilience amid tariff uncertainty positions it as a hedge, though risk assets show muted concern outside specific sectors.
US gold imports will likely rise as investors hedge tariff risks, suggesting a rebalancing narrative over a strategic government play.
Fiscal Policy and Bond Market Dynamics
Fiscal concerns have emerged with US deficits at 6%+ of GDP and expected tax cuts under a Republican trifecta. Armstrong questioned if bond vigilantes will demand higher yields (term premium) due to deficit fears, though US growth mitigates this compared to the UK.
Gold absorbs some fiscal risk, holding value as an alternative to bonds if confidence in US debt wanes.
Transfers to the US may increase as investors diversify from bonds, driven by private demand rather than a government-led gold grab.
Contrast Between US and Global Economies
Armstrong emphasized the stark U.S.-global divergence: robust US growth (retail sales, optimism) vs. Europe's stagnation and China's struggles, amplified by a stronger dollar.
US investors favor risk assets over gold, while global buyers (central banks, Asian markets) drive demand, keeping prices stable despite relative Western disinterest.
Gold flows to the US are part of broader global demand, with US markets acting as a conduit rather than the primary driver. This reflects investor caution rather than accumulation.
Emotional and Strategic Role of Gold
An anecdote about gold cufflinks underscores gold's emotional appeal as a crisis asset, while Reade and Cavatoni argue it's a strategic portfolio component, offering long-term returns and insurance.
This dual emotional and strategic role explains gold's consistent allocations in the US, its remaining stability amid uncertainty, and its complementing purchases from Asia.
Emotional and strategic motives sustain US gold inflows, primarily from private investors, not a systemic shift.
2025 Outlook for Gold
The World Gold Council predicts a less impressive 2025 (post-27% 2024 gain), with US growth and muted inflation favoring risk assets. Armstrong suggests a "muddle-through" year with more "sound than fury" from Trump's policies.
Gold's price plateau ($2,700) does not reflect an acute crisis, but persistent uncertainty prevents a decline, with flows tied to investor sentiment.
Gold bullion transfers to the US may moderate if uncertainty subsides, reflecting precautionary private buying.
Insurgent View: Unpacked
Collapse of the LBMA Paper Gold Market
The LBMA, historically a hub for gold pricing and trading, has shifted from T+2 (two-day delivery) to T+60 or T+90 for physical gold delivery, signaling a severe liquidity crisis. Experts like Andrew Maguire note this effectively turns LBMA gold into forward contracts rather than spot prices, undermining its credibility as a physical market.
The LBMA's claim of holding 8,535 metric tons is doubtful, suggesting it may be encumbered or non-deliverable. The "fire brigade" analogy describes how the LBMA allocates limited physical gold to cover immediate demands while papering over deficits with unallocated contracts (estimated 100:1 paper-to-physical ratio).
This perceived discrepancy drives gold bullion transfers to the US, where the COMEX has seen unprecedented delivery demands (498 tons in December-January, 200 tons for February). The US is exploiting this weakness to drain physical gold from London deliberately.
US Repatriation and Accumulation of Gold
Eric posits that the US government or Federal Reserve, possibly via proxies like JPMorgan, is the massive buyer at COMEX, accumulating 700 tons in three months—a 15-fold increase over prior trends. Basel III implementation (July 2025) may be the cause, requiring physical gold as a Tier 1 asset and an anticipated audit of US gold reserves.
The US is repatriating its gold and acquiring more to support a sovereign wealth fund or gold-backed bonds (Judy Shelton's proposal). Speculation suggests that Fort Knox may hold more gold than reported, reversing expectations of depletion.
Gold bullion transfers to the US reflect a deliberate strategy to amass physical reserves, likely exceeding official figures (8,133.46 tons), positioning the US as the winner in a global gold scramble.
Geopolitical Power Shift and Public Humiliation of the LBMA
The US is publicly draining the LBMA via COMEX rather than discreetly through London, interpreted as a humiliation of the City of London.
The shift exposes the LBMA's reliance on rehypothecation and borrowed gold (e.g., from central banks like South Korea and India), which are suspending sales to protect reserves or due to the inability to retrieve gold from London.
Transfers to the US are a power play, accelerating the decline of London's gold market dominance and rerouting global flows through American markets.
Basel III and Financial Recapitalization
Effective July 2025 in the U.S., Basel III mandates physical gold for bank reserves, ending unallocated contracts. Vince notes that JPMorgan and Citibank's gold derivatives, previously hidden in FX buckets, are now exposed, driving the need for physical gold.
This regulatory shift forces US banks (e.g., JPMorgan, a key bullion bank) to secure physical gold, aligning with repatriation efforts. Revaluation to market prices (e.g., $3,000/oz) could fund a sovereign wealth fund or debt retirement via a sinking fund.
Sovereign Wealth Fund and Debt Management Strategies
Gold revaluation and debt recapitalization are pillars of Trump's executive order (February 3, 2025) to establish a sovereign wealth fund. Proposals include Judy Shelton's gold-backed bonds, Vince's sinking fund to retire treasuries, and a cash-for-equity swap leveraging $32 trillion in US housing equity.
Gold is central to these plans—revalued to boost balance sheets, used as collateral for bonds, or held in a wealth fund to buy back debt, reducing interest costs and stimulating the economy.
Transfers support these initiatives, ensuring the US has sufficient gold to execute a financial reset, potentially marking a shift to a gold-supported domestic dollar.
Global Demand and Pricing Dynamics
China's insurance companies (300 tons/year) and retail accumulation programs (additional 300 tons) signal rising global demand alongside US accumulation. Silver's price suppression is ending, reflecting a broader shift in commodity pricing.
COMEX now commands the highest gold price, followed by Shanghai. Delivery delays are discounting LBMA prices. Driven by US and Chinese demand, a potential $4,000/oz price by year-end is predicted.
Gold bullion transfers to the US are part of a global rush, with the US outpacing others, potentially tightening supply and pushing prices higher.
New World Order and Financial Nationalism
The discussion envisions a "Yalta II" summit (Trump, Putin, Xi) to carve up global influence. The US might adopt China-style capital controls and financial nationalism, with gold underpinning the shift, securing trade and stabilizing the dollar.
Gold's role as a neutral reserve asset grows, supporting a two-tier dollar system (domestic asset-backed, offshore tokenized) and reducing reliance on treasuries.
Transfers to the US are a strategic move to fortify this speculated new order and ensure that gold reserves match economic and geopolitical ambitions.
Notably, London clearing volumes are low, confirming how unprecedented the trans-Atlantic transfers have been.
Conclusion
Tariff-driven rebalancing drives gold and silver bullion transfers to the US in early 2025, with investors stockpiling gold (260-498 tons) to hedge Trump's policies. However, the contrarian view is certainly interesting!
There is merit to a US sovereign wealth fund stockpiling gold, but no firm evidence exists. The Basel III deadlines carry some weight, but it would be very unlike the large institutions to wait on the doorstep of the deadlines before taking action. The deadline for US full compliance, including Net Stable Funding Ratio (NSFR) and capital rules, is July 1, 2025. From then, physical gold's status as a Tier 1 asset will be fully operational, allowing banks to exchange it for cash directly via Federal Reserve facilities. Phased implementation continues through 2028, with gold holdings increasingly scrutinized for liquidity and risk management.
The idea of a "Bretton Woods III" realignment remains a speculative leap without any hard data or news flow to support it. However, the Trump administration's emerging policies indicate a trend toward US financial nationalism and nativism.
Let's rest on market expert Ross Norman's market quip, "It's demand, not drama," and see how things play out between the two opposing perspectives.