Gold Market Shortages: Causes, Risks, and Price Effects

Over a few quiet weeks in early 2025, something extraordinary happened in the plumbing of the global gold market — and most investors never noticed. Roughly 400 tonnes of physical gold were airlifted across the Atlantic from London's vaults to COMEX warehouses in New York, swelling US stockpiles by around 75%. In London, the world's largest physical gold market, delivery times that normally run two to three days suddenly blew out to four to eight weeks. Some analysts called it what it looked like: a technical default. So when people ask whether a new global crisis could trigger a gold shortage, the uncomfortable truth is that the wholesale market has already shown its cracks. The real question is what happens when a genuine crisis hits those cracks at full force.

Is There a Gold Shortage Right Now?

Not in the sense of "the world is running out of gold" — but yes, there's a real liquidity strain in the wholesale market. Here's what's driving it. After US tariff threats on imports, traders rushed to move physical gold into the United States to get ahead of potential duties, because COMEX futures were trading at a premium to London spot prices. That arbitrage — sell expensive gold in New York, source cheaper gold in London — drained London's readily available metal.

The numbers are striking. London's vaults hold hundreds of millions of ounces on paper, but only a small fraction — the so-called "float" of around 36 million ounces — is actually free to trade at any moment. Against that sits an estimated 380–400 million ounces of outstanding spot contracts. When everyone wants delivery at once, the math simply doesn't work, which is why delivery timelines stretched from days to weeks. The Royal Mint, for its part, offered a calmer reading: much of the delay is a logistical bottleneck, since refiners must melt and recast London's large 400oz bars into the 100oz and 1kg bars COMEX requires, and that takes time and capacity.

The 96% Problem: Paper Gold vs Physical Gold

To understand how a crisis could trigger a real gold shortage, you have to understand a single stunning statistic: by most estimates, around 96% of the gold traded each day in London and New York is paper gold — futures, contracts, and electronic claims — and only about 4% is physical metal that could ever actually be delivered. The system works smoothly because, in normal times, almost nobody asks for the physical. Only a tiny fraction of COMEX contracts ever go to delivery; the rest are cash-settled or rolled over.

This is the fault line. A market built on the assumption that few people will ever demand physical metal is, by definition, fragile to a scenario where many people demand it at once. That scenario has a name: a crisis.

Could a New Global Crisis Trigger a Real Gold Shortage?

This is where it gets serious. The tariff-driven scramble of 2025 was a relatively mild stress test — and it still produced multi-week delivery delays and talk of technical defaults. Now imagine a genuine global crisis layered on top: a banking panic, a sovereign debt scare, a major escalation in the Middle East, or a sharp loss of confidence in a reserve currency. In any of those, demand for physical gold doesn't rise politely — it explodes, simultaneously, from every direction at once.

In that scenario, the wholesale strain already visible in London could intensify dramatically. Central banks holding gold at the Bank of England may decline to lease it out, removing the very liquidity that lets the forward market function. Bullion banks short of metal would be forced to bid up prices to source it or to roll over their delivery obligations. And because the paper market dwarfs the physical, even a modest shift toward demanding real metal could overwhelm the available supply. A new global crisis wouldn't create the vulnerability — it would expose one that already exists.

Would a Gold Shortage Actually Reach Retail Buyers?

Here's the balanced view, because it matters and the answer is genuinely nuanced. A wholesale squeeze does not automatically mean empty shelves for everyday investors. The Royal Mint argued that the 2025 strain was largely a problem of moving and recasting large bars for institutional delivery, and that the knock-on effect for retail coins and small bars should be limited — partly because its own vault sits outside the loco-London clearing system, with customer metal held on an allocated basis.

But history complicates that reassurance. In genuine fear events — 2008, the 2020 COVID panic — retail buyers did face shortages: the US Mint suspended sales of American Eagle coins, dealers sold out, and premiums on physical coins spiked 8–15% over spot. The mechanism is simple: refineries and mints have fixed output, coin blanks take time to strike, and a sudden surge in retail demand can't be met overnight. So the honest answer is that a wholesale shortage and a retail shortage are different problems, but a severe enough crisis can produce both at once — the wholesale strain first, the retail squeeze close behind.

What a Gold Shortage Would Mean for Prices

The price implications cut in one clear direction. When physical gold becomes scarce relative to demand, the premium over spot widens — sometimes sharply — and the spot price itself tends to rise as the squeeze feeds through. In the 2025 episode, COMEX futures traded notably above London spot, and a sustained physical squeeze, by most analyses, puts upward pressure on gold prices. If a real crisis ever forced the paper market to confront how little physical backs it, the repricing could be significant. That's precisely why some long-term investors hold allocated physical metal: not to trade the squeeze, but to own something that isn't a claim on someone else's promise.

How to Protect Yourself From a Potential Gold Shortage

1. 1.Decide before the crisis, not during it. The whole trap of a shortage is that it forces decisions under pressure, at the worst prices. Set your allocation while markets are calm.
2. 2.Favour allocated, not unallocated, holdings. Allocated metal is specific bars that are yours; unallocated is a claim on a pool. In a genuine squeeze, that distinction is the whole game.
3. 3.Verify storage and audit. Use reputable vaults that hold metal on an allocated or segregated basis and publish audits — not 'we'll hold it for you' arrangements.
4. 4.Use ETFs for liquidity, physical for security. If you need fast, liquid exposure during a panic, ETFs trade at spot. If you want crisis insurance with no counterparty, allocated physical is the point.
5. 5.Don't chase peak premiums. If retail premiums spike into double digits during a panic, waiting for them to normalise (typically 4–8 weeks) while holding ETF exposure is often the smarter play.

Frequently Asked Questions

Is there a gold shortage in 2026?

Not a shortage of gold in the ground, but a real liquidity strain in the wholesale market. Since US tariff threats in late 2024–2025, hundreds of tonnes of physical gold flowed from London to New York, draining London's readily tradable 'float' and stretching delivery times from days to weeks. Retail availability has been less affected so far, but the wholesale cracks are genuine and well-documented.

Is there a gold shortage in the UK or at the Bank of England?

There have been significant delivery delays in the London market, where much of the world's gold (including foreign reserves) is vaulted, including at the Bank of England. Delivery timelines reportedly stretched to four to eight weeks versus the usual two to three days, which some analysts described as a technical default. The Bank of England and LBMA characterise it more as a logistical bottleneck than an outright shortage — but the strain is real.

What is the COMEX gold shortage about?

It's less a shortage at COMEX and more a massive inflow: COMEX warehouse stocks surged about 75% as traders rushed physical gold into the US ahead of potential tariffs, because COMEX futures were trading above London spot. That arbitrage drained metal from London, creating the squeeze there. The deeper issue is that the paper gold market is far larger than the physical metal available to settle it.

Can the Bank of England or COMEX actually run out of gold?

They're extremely unlikely to literally 'run out,' but they can run short of readily deliverable metal relative to demand — which is what the delivery delays revealed. Because only a small fraction of vaulted gold is free-floating at any time, and much is pledged to central banks or ETFs, a surge in delivery demand can overwhelm what's immediately available, forcing delays and higher prices rather than an outright zero.

What happens to gold prices during a shortage?

Physical scarcity relative to demand typically widens the premium over spot and pushes the spot price higher as the squeeze feeds through. In the 2025 episode, COMEX futures traded above London spot, and a sustained physical squeeze generally adds upward pressure on prices. In retail panics like 2008 and 2020, coin premiums spiked 8–15% over spot and mints suspended sales — a pattern that could repeat in a severe enough crisis.

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