No Gold Liquidity In The London Market: Distress Signals From London Gold Vault And Market Data

Feb 07, 2025

Over the past 9 weeks, New York COMEX vault data show that the total NY COMEX vault stock of gold has increased 16 million (M) oz., or 498 tonnes, with likely more gold on its way.

Today, the London Bullion Market Association (LBMA) issued an early news release announcing that London gold vault holdings, that serve the world’s largest cash/spot gold market, had been drawn-down by 151 tonnes (4.87M oz.) of gold in January 2025.

This follows a draw on London vaults of 30 tonnes (963,000 oz.) in December 2024.

While recognizing that there is more gold in transit, these data indicate that of the 16M oz. added to NY vaults since the beginning of December 2024, only 5.8M oz. or 36% came from London vaults.

The LBMA frequently promotes the fact that London vaults hold approximately 280M oz. of gold and that the London gold market is highly liquid.

However, the Financial Times of the City of London reports this week that “Overnight leasing rates for gold recently jumped as high as 12 per cent, according to Philip Newman, managing director at Metals Focus, a London-based precious metals consultancy.”

London Gold Vaults Are Saying ‘No Mas’

A lease rate of 12% to borrow gold is extremely unusual compared to the 2% to 3% level seen until very recently.

The high lease rates are indicating that London market participants who need to acquire physical gold can no longer buy sufficient metal and are being forced to borrow the metal at a very stiff interest rate.

Of particular note, from the beginning of December 2024 to the end of January 2025, London vaults have only had 2% of the total gold vault stock removed yet in recent weeks the gold lease rate has spiked as high as 12%.

This indicates to us that the London gold market is not liquid and has had its vault stock of ‘free float’ gold, or the amount of the total liquid stock of gold that was actually available to market, desiccated to the point that the liquid gold stock in London now appears to be well dried-out.
The green portion of the graph below of London gold vault holdings represents the gold ‘float’ or the portion of London gold not held by the Bank of England or by ETFs and therefor potentially available to market.
The ‘free float’, which is the portion of the float that is actually available for sale into the market, appears to be wafer thin.

Market data indicate that with an estimated 400M oz. or 12,440 tonnes of cash/spot contracts issued and standing in the London gold market, it took a draw-down of 5.8M oz. or 181 tonnes of gold from vaults to distress the London gold market.

That’s not a liquid market. Nor does it appear solvent.