Gold Is On Fire: Demand Is So High That Dealers Are Importing Gold Bars From Abroad On Commercial Jets

If you've recently flown from London to the U.S., something very valuable may have been in the cargo hold with your luggage: gold bars. The Wall Street Journal is reporting America's demand for gold is so strong that big banks like JPMorgan Chase (NYSE: JPM) are buying bars in London and flying them to New York on commercial jets. To be certain, JPMorgan's motives go further than just satisfying their customers.

Buying gold in bulk is a winning deal for them. According to the Journal, the price of gold in America is much higher than in London. So, JPMorgan and other banks are taking advantage of that by purchasing London gold bars at a discount and then selling them to American investors at a profit. They're not just looking in London either. Buyers are searching for gold in Switzerland too.

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Ironically, the cheapest way to get them here quickly is via commercial jet. The Journal says the domestic price of gold futures has risen by roughly 11% this year while going in the opposite direction in London, where it's down about $20 per ounce since December. That makes buying gold across the pond a smart play.

Goldman Sachs' research team recently noted the price of gold has increased by a whopping 40% since January 2024 and more importantly, they believe there is still room for upside. They project the price of gold will rise by another 8% this year and settle at $3,100 per ounce. That's a significant upward adjustment from their prior projection of $2,890 per ounce.

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Goldman attributes some of the spike in gold prices to high demand from the world's central banks. They have been steadily increasing their gold reserves since Russia's assets were frozen as punishment for invading Ukraine. Goldman's forecast also cited concerns that Trump's tariffs could kick off a trade war that destabilizes the global economy. Their analysts believe that scenario could push the price of gold as high as $3,300 per ounce.

This explains why so many bankers and traders in America are looking to load up on gold. According to the Journal, demand for London gold is so intense that it has created an order backlog that is several weeks long. This is causing nervous traders to make desperate pleas to skip the line and have their orders filled first. The interest rate on loans to buy gold has also skyrocketed in recent weeks.

The surge in gold prices is having other downstream effects. Manufacturing companies that use gold for various components are struggling with the increased prices and those costs will be passed on to consumers.  Apart from that, the complex logistics of transporting all this gold are mind-boggling. Gold from London must be flown to Switzerland to be melted down and re-sized to make it compliant with Comex gold contracts.

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That means private security firms with armored trucks are shuttling gold from the banks to the airports and then the refiners in Switzerland. When the gold arrives in the U.S., there is a similar security protocol to ensure it gets to whatever bank vault it's destined for. Even after all those expenses are accounted for, big banks and major traders see profit in London gold.

So far, the Bank of England is keeping up with demand, but it's feeling the strain. Deputy Governor Dave Ramsden told The Journal, "There are real logistical constraints and security constraints. Getting into the bank for me this morning was a bit trickier because there was a lorry in the bullion yard…It takes time and the stuff is also quite heavy."

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