The Bank of England gold discount has emerged due to a surge in demand for Gold shipments to the United States. This rush has led to a rare price discrepancy, with gold stored in the Bank of England’s vaults trading at a discount of over $5 per ounce compared to the London spot price. Typically, Gold in the BOE vault aligns with prices at major commercial vaults like JP Morgan and HSBC, but withdrawal delays—now stretching to several weeks—have made BOE gold less attractive to traders. The tightness in London’s gold market is further exacerbated by soaring leasing rates (up to 4.7%).

As central banks seek to profit from lending gold. Additionally, a logistical bottleneck exists since the 400-ounce gold bars stored in London must be refined into smaller bars before being shipped to New York, adding costs and delaying deliveries. The mismatch in supply and demand has triggered backwardation—where the spot price of gold exceeds future prices—a rare signal of short-term scarcity. With traders frustrated by delays and shifting to commercial vaults, the BOE’s role as a gold custodian is now under scrutiny, raising concerns about its ability to efficiently manage large-scale gold withdrawals.