Gold bars, weighing about 400 troy ounces and looking like bricks, are regularly sent from London to Switzerland. There, it is converted into a kg gold bar (of smartphone sizes) to be sent to the US markets.

This is because the one-kg gold bars are the bread and butter of the Commodity Exchange (Comex) in the US, where gold’s paper price is exchanged with physical precious metal. However, this is headed for disruption after the Donald Trump administration imposed a 39 per cent tariff. 

In a July 31 letter, the US Customs and Border Protection said these bars fall under code 7108.13.5500, which is subject to tariffs. This has led to Comex gold December futures soaring to $3,545 an ounce on Thursday night before paring gains to $3,473 at 1700 hours IST. On the London Metal Exchange, it traded at $3,386 an ounce. 

Traders holding shorts

The tariff would mean that an ounce of gold worth $3,400 would cost $4,725 on landing in the US. 

Global wealth management firm UBS has warned that the US tariffs on the gold bars will disrupt fund markets. “Because the US tariffs now hit large gold bars, a lot of traders holding these short EFP (exchange-for-physical) positions may decide to close them out instead of delivering physical gold into the US (because doing so is now more expensive),” it said.

Closing out the positions would mean that traders need to buy back futures and unwind the physical delivery side. “That unwinding process will create a sudden need for cash and liquidity in London’s gold market, because the physical leg of these trades — which is financed — has to be funded or replaced. 

“In short, tariffs make delivering gold into the US pricier, so many traders will pull back and close their positions, and that mass closure creates funding stress in the London market,” said the Swiss firm.

Upheaval in bullion logistics

Switzerland is the capital of world gold refining. It may now have to spend an additional $24 billion, paying the tariffs. Gold bars worth about $61 billion were delivered to the US in the past year. 

Stephen Innes of SPI Asset Management wrote in Fxstreet.com that with this ruling, nearly two-fifths of the gold being sent to the US falls under the tariff umbrella. “The market isn’t just digesting another trade war headline — it’s bracing for structural upheaval in bullion logistics,” he said.

Innes said the historical trade triangle — London’s 400-ounce bars smelted and resized in Switzerland before shipping out as kilo bars to New York — is cracking. The latest development belied hopes that the gold bars would fall under a safe harbour code 7108.12.10.

A couple of major Swiss refineries have suspended shipments to the US. Traders, on the other hand, are looking for arbitrage opportunities.

Rewriting global script

“Now, the trap door has sprung — and the global flow of physical metal just got more expensive, more complicated, and more political,” said Innes.

Trump targeting kilo bars is rewriting the global script on what is a neutral store of value, he said. It’s a sign that haven gold is not even safe from global trade wars. 

Ross Norman, CEO of Metalsdaily.com, said the tariff is akin to pouring sand into an “otherwise well-functioning engine”. This could probably result in non-Swiss gold bars fetching a hefty premium and Swiss bars being offered at a discount. 

Innes said the tariffs would weaken the Swiss monopoly in gold refining, turn London bullion banks defensive and “supercharge” the fiscal options by increasing the valuation of gold in the US. “It’s a geopolitical ‘two-for-one’ with a balance-sheet kicker. A tariff war dressed up as a gold squeeze,” he said.

Published on August 8, 2025