The European Central Bank published research in its May 2025 Financial Stability Review examining gold’s sharp price rise since 2023, its behaviour in past stress episodes and recent developments in gold futures and derivatives markets. The analysis finds that gold generally acts as a safe haven during periods of heightened geopolitical risk and economic policy uncertainty, but cautions that disruptions in physical settlement dynamics and leveraged derivatives positions could create tail risks for financial stability. Recent trade-related policy uncertainty, which spiked after the November 2024 US presidential election, coincided with increased demand for physical delivery through COMEX futures, rising vault inventories and historically high delivery notices in 2025, with January notices the highest since July 2007. Ahead of the 2 April 2025 US tariff announcement, reported concerns about potential gold import tariffs and a price gap between New York futures and London spot contributed to shipments of gold from London to New York and higher borrowing and sourcing costs in London. The ECB notes that sudden stress and disruptions to sourcing, shipping and delivery could leave counterparties obliged to deliver physical gold facing increased margin calls and losses. For the euro area, gross notional exposures to gold derivatives reached EUR 1 trillion in March 2025, up 58% since November 2024, with a significant share traded over-the-counter and not centrally cleared and around 48% of contracts involving a bank counterparty; euro area banks’ exposures are mainly to non-euro area counterparties. Gold exchange-traded fund exposures were EUR 50 billion in the fourth quarter of 2024 and were held predominantly by households and investment funds.
European Central Bank 2025-05-19
European Central Bank analysis warns gold market tail risks could spill over via €1 trillion euro area gold derivatives exposures
The European Central Bank's May 2025 Financial Stability Review emphasizes gold's role as a safe haven amid uncertainties, while warning of tail risks from disruptions in physical settlement and leveraged derivatives. The report notes increased demand for physical delivery through COMEX futures and significant euro area exposures to gold derivatives, with gross notional exposures reaching EUR 1 trillion in March 2025. Concerns over potential gold import tariffs and price discrepancies have led to increased shipping from London to New York and higher costs in London.