The global gold market is on the verge of a tremendous shake up. Inflationary pressures, increasing U.S. fiscal imbalances, and trepidation over the dollar’s falling hegemony as the world’s reserve currency are all coming to a head. A recent tariff ruling by U.S. Customs and Border Protection throws a wrench into the financial picture. Now, kilo and 100-ounce gold bars are classified under a brand-new customs classification that makes them tariffable. As a result, Switzerland’s gold refining sector, known for its pivotal role in global bullion logistics, must now navigate a complex web of tariffs that could reshape the industry’s future.
Switzerland has rightly received its accolades as the world’s refining capital. It is the final stop for gold that fuels international markets. London’s 400-ounce bars are smelted in Switzerland. From here they are formed into one-kilo bars that are sent to New York. This logistical process has turned kilo bars into the Comex’s mainstay. This is where Indian gold futures are traded, and their physical demand for gold creates a direct line between paper pricing and the physical market.
The Trump administration just slapped a $10,000 tariff—39%—on gold imports. As a result, the trading community has largely come to view this ruling as a de facto “gold tax.” The ruling has particular implications for kilo bars, which have been critical to the operations of Swiss refineries. Switzerland, for its part, has sent a record $61.5 billion in gold across the Atlantic over the past year. The large majority of this gold was shipped in these types. That’s no small matter, as at least two of those refineries have already begun reducing or stopping shipments to the U.S. This poses serious concerns about the long-term effects on Swiss exports and the global gold supply chain as a whole.
The Comex has since become a brutal war zone. In this case, gold price volatility is uncovering the rhythm of prevailing economic fear and the extent of global real demand. Just in 2023 so far, gold prices have increased by 27%, approaching $3,500 per ounce. Central banks around the globe are vastly growing their gold stockpiles. They’re doing this primarily to get out of dollar risk, motivated by fears of inflation and general economic chaos. With central banks accumulating gold in record amounts, the climb for kilo bars is only increasing, with the recent tariff ruling coming at a highly inconvenient time.
The ramifications of this customs ruling go far beyond Switzerland. The ruling puts virtual toll booths on the global metal highway. Second, the U.S. government is primarily targeting kilo bars, which has a direct impact on Swiss refineries. This move is shifting the direction of gold flowing into the U.S. market. Tariffs pose major logistical hurdles. As a consequence, American consumers and investors seeking exposure to physical gold may pay more.
Given this trajectory, the way that Swiss refineries respond to this changing reality is of great interest to industry observers. Switzerland will suffer an enormous $24 billion economic blow from these tariffs. This worrisome situation begs the question of whether its heavy refining operations can survive such $-down economic headwinds. Facing increased costs and regulatory challenges, companies are re-evaluating their plans. This has led to concern about what may be in store for the future of Swiss gold logistics.
Yet the conjunction of geopolitical consideration and economic policy further exacerbate the decades long collapse of the traditional channels of gold distribution. Inflation worries and increased deficits are adding to speculation in the market. Traders need to cope with these new realities, otherwise they have the potential to drastically alter their livelihoods. As they chart a course through this tempestuous seas, the impact of these tariffs will almost certainly echo across the ocean and back through our own fragile economy.