Gold Exchange for Physical, EFP
The gold arbitrage everyone assumes is automatic depends on planes, refineries, and bank credit lines.
The Gold Market’s Most Important, Least Understood Bridge
On March 24, 2020, something “impossible” happened in the New York gold market. COMEX gold futures traded more than $70 above London spot. In a normal year, that gap runs $1 to $2. The arbitrage broke.
The largest, most reliable arbitrage channel in the gold market seized up almost completely within days. Outside Wall Street and the City of London, almost nobody knows its name. It’s called EFP. Exchange for Physical. A short-lived breakdown that put the global gold market through a rare stress test in spring 2020. Understanding what happened that day — and why EFP remains one of the least understood parts of the gold market — starts with a more basic question.
Two Worlds, One Price
The global gold market is really two entirely different systems.
COMEX in New York is where price discovery happens. CME Group data shows COMEX gold futures typically trade 300,000 to 500,000 contracts a day, translating to a notional 800 to 1,200 tonnes — roughly a fifth to a quarter of the entire Fort Knox reserve, changing hands daily in New York. That’s a notional conversion, not actual physical flow. Traders buy and sell standardized 100-ounce contracts and mostly have zero interest in the metal itself. CTAs, macro funds, quants bet on rates, inflation, geopolitics. Positions get closed or rolled before expiry in most cases.