The furnaces at the Argor-Heraeus gold refinery in southern Switzerland operate 24 hours a day, occasionally ringing with the sound of a newly minted gold bar falling from a mold. The plant has never been busier, according to co-CEO Robin Kolvenbach. Since December 2024, the refinery has been running non-stop to meet the huge demand for 1kg gold bars in New York (USA).
“Demand has increased significantly,” Kolvenbach said. “Normally, a peak demand period lasts only one to two weeks. But it is quite unusual for this situation to last for more than three months.”
Gold bars being crafted at a Swiss refinery (Photo: Anthony Anex).
Gold Rush in America
Since December 2024, concerns that US President Donald Trump may impose tariffs on gold imports have roiled markets and pushed gold prices to a record high of more than $3,000 an ounce late last week. US gold futures rose 0.4% to $3,002.3 an ounce.
"The gold rush to surpass $3,000 an ounce was driven by panicked investors seeking safe havens amid the Trump-induced stock market turmoil," said Tai Wong, an independent metals trader.
More than $61 billion in gold bullion has poured into the United States as traders scrambled to avoid potential tariffs, destabilizing the country’s trade data and causing a shortage in London, the world’s largest gold trading hub.
The gold rush in the United States has kept Kolvenbach busy, due to differences in bullion standards across global markets. In London, most trading is done in 400-ounce bars, about the size of a brick.
Meanwhile, the Comex exchange in New York uses a 1kg gold bar, the size of a smartphone, as its standard. This means that before being transported across the Atlantic, the gold bars must stop in Switzerland - home to the world's largest gold refineries - to be melted and recast.
In a world where financial transactions can be settled in a fraction of a second, this booming three-way trade shows that the gold industry still relies on physical blocks of metal. Under normal circumstances, contracts worth billions of dollars are traded without moving a single bar of gold from a vault.
But Mr Trump’s aggressive trade policies have strained the system. While he has not mentioned imposing a tariff on bullion, the small possibility that he could do so would be enough to push US gold futures prices higher than London, creating an arbitrage opportunity for traders willing to ship the metal across the Atlantic.
The last time there was a significant price gap was at the beginning of the pandemic. But now, the amount of gold stored in New York has surpassed the previous pandemic-era record.
“The physicality of gold is often underestimated, especially by people in the financial world who just trade it on Bloomberg all day,” said John Reade, senior strategist at the World Gold Council. “Gold has the characteristics of a financial asset, but it is also a physical asset.”
Gold prices hit a record high of more than $3,000/ounce due to concerns that Mr. Trump may impose import taxes on gold (Photo: SGInsight).
Gold bars and liquidity problem: Pressure from BoE to Wall Street
The journey of gold bars to New York often begins deep underground, inside one of nine gold vaults under the Bank of England (BoE) in the heart of London's financial district.
When a withdrawal is ordered, a staff member goes into the vault and “digs” out the requested gold, often moving several bars to find the right ones. Because London is built on clay, the soft foundations of the BoE building only allow gold to be stacked up to shoulder height. This process is time-consuming and has become the biggest bottleneck in the supply chain for 1kg bars.
Gold miners must undergo rigorous background checks, be carefully trained, and be strong enough to lift gold bars all day, so staffing levels cannot be quickly increased to meet short-term demand.
The first signs of increased demand came in early December 2024, when industry leaders gathered at a dinner hosted by the London Bullion Market Association (LBMA) at the National Gallery to discuss growing demand from the U.S. As traders rushed to ship gold from London to New York, the queue for withdrawals from the BoE quickly grew to more than four weeks, causing a liquidity crunch in the London gold market.
Short-term gold rental rates hit a record last month as traders struggled to access physical gold, pushing up working capital costs for businesses such as refiners and jewelry makers.
“There is a very strong demand for gold,” Dave Ramsden, deputy governor of the Bank of England (BoE), admitted at a press conference in February. He also said that on his way to the headquarters that morning, he was blocked by a truck carrying gold. “Gold is a physical asset, so there are real logistical and security constraints.”
The Bank of England holds gold for dozens of central banks and major financial institutions, but only 6% of the gold in its vaults is owned by the UK Treasury.
London remains the center of the physical gold market, despite the logistical bottlenecks Ramsden mentioned and New York’s dominance in futures trading. One of the main reasons is that the BoE offers lower storage fees than other commercial gold vaults.
More importantly, absolute trust has helped London maintain this role: investors and central banks feel secure depositing gold in the vaults under Threadneedle Street thanks to a reputation that has been affirmed over centuries.
The race in the Swiss smelters
The journey of gold bars from London to New York is a fascinating story of financial flows, complex logistics and unexpected shocks in global markets.
Once the gold bars leave the BoE vaults, they are loaded into armoured vehicles, driven to Heathrow Airport and onto passenger planes bound for Zurich, Switzerland. For insurance reasons, each flight is limited to a maximum of 5 tonnes of gold. From Zurich, the gold is taken to refineries, where it is melted down and recast into 1kg bars before continuing its journey to the US.
The entire process, from transportation to recycling, costs about $3 to $5 per ounce, according to the World Gold Council. That’s a steep price to pay for moving a precious asset thousands of miles, but it’s entirely reasonable given the skyrocketing demand for gold in the United States.
In the town of Mendrisio, near the Italian border, the Argor-Heraeus refinery is working at full capacity to process the huge influx of gold from London. The 400-ounce bars, 99.99% pure, are melted down and recast into long gold strips in a continuous casting machine. They are then cut into pieces of about 1kg, weighed, poured into moulds and cooled before being stamped and polished.
Molten gold is poured into rectangular molds in a smelter (Photo: Vera Leysinger).
Passing the smelter, Kolvenbach points to two workers carefully pouring gold into molds. “We operate 24/7 to meet demand,” he says. But Argor-Heraeus doesn’t just recycle gold; it also refines raw gold from mines, manufactures jewelry, and operates a foundry that creates smaller gold bars.
One of the most important areas of the plant is the laboratory, where each gold bar is rigorously tested before it leaves the facility. However, the global liquidity crunch has pushed short-term gold rental costs to record highs, causing refineries to run at a higher cost. Kolvenbach calls it a “black swan event”—a rare occurrence with far-reaching implications for the entire gold industry.
“It has been extremely difficult for all parties involved,” he said. While gold leasing rates have come down from their peak in February, they remain three times higher than normal, continuing to put pressure on the industry.
Why don't London and New York use the same gold bars?
One of the biggest mysteries in the gold market is the difference in gold bullion standards between London and New York. In London, the standard gold bar weighs 400 ounces (about 12.5 kg), while New York uses 1 kg bars. This creates inconsistencies in trading, forcing gold to go through Switzerland for recycling before entering the United States.
Kolvenbach also had no satisfactory explanation: "Does it make sense? No. I've asked myself this many times."
The Comex exchange in New York tried to introduce a 400-ounce gold contract during the pandemic, but it was unsuccessful. Ruth Crowell, CEO of the London Bullion Market Association (LBMA), said the market should agree on a common standard. "Hopefully, after this chaos, London and New York will reconsider the shape and size of gold bars," she said.
However, according to John Reade, senior expert at the World Gold Council, this difference continues to exist simply because of market inertia. "While it causes a lot of inconvenience, it also creates financial opportunities for all parties involved, from refiners to transporters to traders who take on the risk of transporting gold to New York," he said.
Now, as concerns about tariffs on gold ease, the pace of gold shipments into the U.S. is slowing. If Mr. Trump’s protectionist policies do not target the precious metal, traders expect the gold flows to reverse as long-term investors move their gold back to London to enjoy lower storage costs.
When that happens, the Swiss gold refineries will enter a new cycle of operation, this time recasting the 1kg gold into 400-ounce bars to complete the journey back to London.
In London, the standard gold bar weighs 400 ounces (about 12.5kg), while New York uses a 1kg bar. (Photo: Keystone).
The gold market is not just numbers on a screen, but also metal bars weighing tens of kilograms transported around the world, creating a complex and volatile supply chain.
This "black swan" event has left a deep mark, reminding investors that, despite the increasingly digital financial world, gold is still a physical asset, and sometimes, its value lies in arduous cross-continental journeys like this.
Source: https://dantri.com.vn/kinh-doanh/con-loc-vang-thoi-hanh-trinh-nhung-chiec-may-bay-cho-vang-tu-anh-den-my-20250317220607656.htm
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