A massive influx of foreign gold into New York vaults is raising concerns that the U.S. trade deficit may approach a historic high.
The U.S. Department of Commerce is set to release the February goods trade balance report on Thursday, March 27. Some analysts predict that the deficit could widen further, potentially matching or exceeding January’s $155.6 billion shortfall.
Trade Deficit Expected to Widen
Stephen Stanley, Chief Economist at Santander US Capital Markets, forecasts that the trade deficit may expand to nearly $162 billion.
The primary driver of this widening deficit is the surge in U.S. gold imports. Amid market concerns that the Trump administration may impose tariffs on precious metals, gold reserves in the U.S. have soared in recent months.
New York Gold Reserves at Record Levels
This trend has pushed up gold prices and created arbitrage opportunities, prompting banks, investors, and traders to relocate gold from export hubs like the UK and Switzerland to New York’s commodity trading centers and vaults.
The New York Mercantile Exchange (COMEX) gold inventories surged 43% in January and another 25% in February. As of Tuesday, COMEX gold reserves hit a record 42.6 million ounces, nearly double the levels at the end of 2024.
Economic Concerns and GDP Impact
While a surge in imports typically dampens economic growth, gold imported for investment purposes is not factored into GDP calculations. However, the expanding trade deficit has exacerbated market concerns about economic stagnation and potential recession risks under Trump’s tariff policies.
A similar trend is observed in the silver market, but unlike gold, silver is counted in GDP calculations regardless of its end use. However, its lower value makes its overall impact on the trade deficit less significant.
The Atlanta Fed’s GDPNow model projects that the U.S. economy may contract by 1.8% in Q1, with trade subtracting up to 4 percentage points from GDP. However, the model does not account for gold imports, meaning the actual contraction could be less severe.
Additionally, the final Q4 2023 GDP data will be released on Thursday, while preliminary Q1 2024 GDP figures will be published in late April.
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