This podcast episode investigates the unusual practice of transporting billions of dollars worth of gold bars via commercial flights from London to New York. The interview explains how gold traders use a hedging strategy involving futures contracts in New York to offset risks associated with holding physical gold in London. However, a price discrepancy between London and New York gold, exacerbated by potential US tariffs, disrupted this strategy, forcing traders to physically ship gold to cover their losses. This led to logistical challenges, including long queues at the Bank of England vaults and the need for gold bar resizing in Swiss refineries. Ultimately, the situation created a new arbitrage opportunity for traders to profit from the price difference.
