Deep beneath the Bank of England, within a labyrinth of vaults that rarely allow cameras, lies the second largest known collection of gold in the world.
Historically, these vaults housed bullion owned by the Crown, but they now primarily function as a safe haven for other central banks and private institutions looking to preserve this vital resource.
However, in recent weeks, concerns have emerged that these vaults may be gradually depleting, prompting worries that the Bank is struggling to manage this outflow. This situation gives rise to a rather troubling inquiry: is the Bank of England running low on gold?
The governor has assured Sky News that there is, in fact, no shortage of gold within the central bank’s vaults, although he conceded that billions of pounds worth of bullion has been transported across the Atlantic in recent months.
The ongoing transactions are indicative of a more profound financial dilemma. Traders are increasingly anxious about the potential for Donald Trump to impose tariffs on the importation of precious metals into the United States. In response, there has been a noticeable surge in the amount of gold stored in New York, not only from London but from various other global locations.
Nonetheless, repatriating gold is a complex task. The logistics of moving it in and out of vaults are time-consuming and require stringent security measures, while the current rush for gold has led to a scarcity of logistical resources. Compounding this issue is the fact that the Bank’s vaults were not originally intended to facilitate large-scale inflows and outflows—therefore, retrieving bars is not a straightforward process.
Last week, deputy governor Dave Ramsden stated: “Gold is a tangible asset, which comes with genuine logistical and security challenges. It requires time to manage the process, and as you’re aware, gold is quite heavy.”
The consequence of this situation is a multi-week wait for anyone wishing to withdraw gold from the Bank, which subsequently has contributed to an increase in the gold price in London.
In a conversation with Sky News last week, Andrew Bailey commented: “London is a pivotal gold market. We have observed fluctuations in the comparative prices of gold in London versus New York recently. This is leading to some gold being transferred to New York, although it’s a modest amount: less than 2% of our total reserves.”
“It’s vital to have comprehensive security and insurance measures in place when transporting gold. One cannot simply load it onto a truck and drive it away; meticulous planning is essential.”
“There are physical limitations that pose constraints. However, we have scheduled slots available for all the gold movements that individuals wish to execute.”
When questioned about remaining gold reserves at the Bank of England, the governor responded: “There’s still an ample supply of gold.”
Adrian Ash, director of research at the precious metals platform BullionVault, remarked: “While there’s a deficit in London’s bullion market, it pertains to labor and transport capacity. New York, on the other hand, is witnessing an excess of gold.”
“This scenario is a manifestation of market dynamics. It has contributed to price increases but hasn’t significantly affected the actual availability of the metal. Most likely, it will eventually flow back into the market.”
“London continues to serve as the hub for global gold trading and storage. Temporary bottlenecks are commonplace and merely underscore the fundamental physical realities of the international gold market.”
“In the long run, however, the Bank of England’s role as a custodian for foreign central banks seeking access to the London market may be challenged. Stockpiles have been gradually declining in recent years, even amid a surge of purchases from emerging market central banks, as reserve managers express concerns regarding sanctions and other geopolitical risks in the context of relations between the West and the Rest.”
