The Queue at the Bank of England

5 min read

Beneath Threadneedle Street sits one of the largest stores of gold in the world. The Bank of England keeps around 400,000 bars for the UK government, commercial banks and other central banks. For decades, getting gold out of those vaults took a few days. In late January the wait stretched to weeks. It is a small story with a large lesson about what physical gold is worth when it is needed.

What happened in January

Reuters reported that the minimum wait to withdraw gold from the Bank of England had risen to four weeks, compared with a few days to a week in normal times. The Financial Times reported waits of up to eight weeks. The Bank stores gold rather than trading it, so the queue was not a sign that the gold had gone. It was a sign that too many people wanted their own metal at the same moment.

The reason was across the Atlantic. Traders feared that the new US administration would place tariffs on imports. Gold, they worried, might be caught up in them. Prices for gold in New York moved above prices in London. Banks and traders rushed to ship metal across the ocean while they still could.

Inside the vaults

It helps to know what sits under the City. The Bank of England holds its gold in nine vaults deep below its offices. Measured by the amount stored, only the Federal Reserve Bank of New York holds more. The bars rest on steel and wood pallets of 80 bars each, roughly a tonne of gold, stacked four high so that forklifts can move them quickly in and out of the vaults.

Very little of that gold belongs to the Bank itself. It owns just two bars, which are kept on display in its museum. Only around 6% of the metal is held for the UK Treasury. Most of the rest belongs to other central banks and to firms in the London gold market that hold accounts there. When gold changes hands between them, it usually stays where it is and only the record of ownership changes.

The Bank's vaults are only part of the London picture. When the London Bullion Market Association first published figures for the city's vaults, it reported around 600,000 gold bars in total. The Bank of England held more than 60% of the gold and silver in London. Commercial vaults run by banks such as HSBC and JP Morgan held the rest.

Gold on the move

Since the US election in November, around 393 tonnes of gold have been added to the stocks held by New York's main futures exchange. Its inventories reached 926 tonnes in late January, the highest since August 2022. Much of that metal came from London vaults. Large London bars often have to be recast into the smaller sizes the New York exchange accepts before they are flown out.

The queue at the Bank of England is the bottleneck in that system. Vaults can only release so many bars a day. Paperwork, security and transport all take time. When demand for physical delivery rises suddenly, the plumbing of the gold market shows its limits.

Paper gold and real gold

Much of the world's gold trading never involves moving a single bar. Contracts change hands on screens. Claims are passed between banks. In calm times this works smoothly because almost nobody asks for delivery.

Even the benchmark price is set this way. Twice each working day, at 10:30 and 15:00 UK time, an electronic auction in London sets the LBMA Gold Price. Banks and trading firms bid for ounces on screen, round by round, until buying and selling roughly balance. The price is real. Yet much of the gold traded on that market is never collected by the buyer, which is why a sudden rush for delivery can catch the system short.

January showed what happens when buyers do ask. The price on a screen is one thing. Holding the metal is another. When large institutions want physical gold in a hurry, they discover that there is a queue. The lesson is an old one. Physical gold is scarce exactly when it matters most.

A long history of trust

The Bank of England has held gold for hundreds of years. Until the early 1930s a banknote could be exchanged at the Bank for gold. That promise has long gone. The vaults remain. Many of the world's central banks still choose to keep their gold in London nearly a century later. They do so because of Britain's long record of stability and its place at the centre of the gold market.

The United States once made a similar promise to the world. After the Second World War the dollar was tied to gold at a price set by Congress of $35 an ounce. Foreign governments could swap their dollars for American gold at that price. On 15 August 1971 that right was suspended, because there was no longer enough gold to cover all the dollars held abroad. Since then every major currency has been backed only by the word of the government that issues it. That is the background to January's queue. When trust in paper promises wobbles, those who can insist on the metal itself.

Records across major currencies

The scramble came as gold reached new highs. It finished January at a record high, up by around 7% for the month in dollars and by more in pounds. Gold also set records in several other major currencies.

The tariff threats became real at the start of February. On 1 February the White House announced tariffs of 25% on goods from Canada and Mexico and 10% on goods from China. The Canadian and Mexican tariffs were paused for 30 days on 3 February. The Chinese tariff took effect on 4 February. China responded with tariffs of its own. Gold has continued to climb. Uncertainty over trade is one more reason for central banks and savers to hold an asset that no government controls.

What it means for savers

For the institutions in the queue, January was an inconvenience. For private savers it is a reminder of why ownership matters. A coin that is yours, held in your own name, does not depend on the plumbing of a global market working smoothly.

UK legal tender gold coins such as Britannias and Sovereigns are made from 999.9 fine gold or 22 carat gold. Gains on them are exempt from Capital Gains Tax for UK residents. Many customers choose coins graded by NGC or PCGS, sealed with a certification number that can be verified online in seconds.

Gold's price moves up and down, sometimes sharply, so it suits money that can be left alone for years. What does not change is that a coin in your hand is not a claim on anyone else.

The Bank of England sets interest rates tomorrow. Whatever it decides, the past month has shown that trust in physical gold runs deeper than any rate decision.

Speak to a specialist

If you would like to talk it through, call a specialist on 0208 064 0076, Monday to Friday, 9am to 5pm, or book a call at a time that suits you.

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Sources

This article is for information only. The value of gold can go down as well as up.

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Gold Insights are independent articles, researched and written by our own team at Gold Tier Advisory.