The U.S. tariffs on kilo and 100-ounce Swiss gold bars — the formats COMEX accepts for delivery — are acting as a stress test on the gold market’s plumbing. The move disrupts the Exchange for Physical link between London’s unallocated market and New York’s deliverable futures, forcing shorts to close or roll positions and risking a funding squeeze in London’s bullion banking system.
By constraining deliverable supply, it accelerates Basel III-driven pressure on bullion banks to hold more physical and reduces the LBMA’s ability to rehypothecate bars. Strategically, it dents Switzerland’s refining dominance, pressures London desks, and strengthens COMEX’s role in global price discovery.
Background to this:
- Financial Times: US hits one-kilo gold bars with tariffs
- UBS has warned that U.S. tariffs on large gold bars could spark disruption
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Also, if you need:
Rehypothecation in the bullion market means a gold bar that’s been pledged as collateral or allocated to one party can be lent out or pledged again to someone else — sometimes multiple times — because in London’s unallocated gold system, most claims are just paper claims, not tied to specific bars in a vault.
When I say tariffs on certain bars curb the LBMA’s ability to rehypothecate, it means:
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Deliverable bars in the right formats (kilo and 100 oz) become harder to get.
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Those bars are the “good delivery” metal that underpins settlement.
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If supply is physically tighter, bullion banks can’t keep reusing the same bars to back multiple transactions.
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That reduces leverage in the system and makes liquidity scarcer in London’s clearing network.
In short — fewer eligible bars = less “recycling” of the same gold through the market’s plumbing.
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The LBMA is the London Bullion Market Association — the industry body that oversees the world’s largest over-the-counter (OTC) market for gold and silver.
Key points about the LBMA:
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It sets the Good Delivery standards for gold and silver bars — specifications like weight, purity, and appearance that bars must meet to be accepted in global trade.
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It coordinates the London bullion clearing system, where most wholesale gold trades are settled.
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Its members include major bullion banks (JPMorgan, HSBC, UBS, etc.), refiners, and traders.
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The market it oversees is largely “unallocated” — meaning most trades are claims on metal rather than specific bars, which allows for rehypothecation and high leverage.
This article was written by Eamonn Sheridan at investinglive.com.