Export stats confirm massive outflow of Western gold to Asia, maybe ETF gold


UK Gold Exports Surge Tenfold This Year

By Jack Farchy
Financial Times, London
Monday, August 19, 2013


The UK's gold exports have surged nearly tenfold this year as investor selling drives the bullion out of London vaults into the hands of Asian consumers.

UK gold exports to Switzerland, the hub of the gold refining industry, leapt to 798 tonnes in the first six months of the year, up from just 83 tonnes in the first half of 2012, according to data from Eurostat, the European Union's statistics office.

The exports -- worth E29 billion and equivalent to nearly 30 per cent of global annual mine production -- underscore the scale of the shift in gold ownership taking place as Western investors lose their enthusiasm for the metal.

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The UK has no commercial-scale gold mines, but London is the centre of the global gold market, with bankers estimating that some 10,000 tonnes are held in the city's vaults, including at the Bank of England, largely by investors and central banks.

Large-scale selling by investors triggered a 26 per cent slide in gold prices from the start of the year to a near three-year low of $1,180 a troy ounce in June.

The price fall has stimulated a huge increase in demand in Asia, particularly China, whose gold association reported a 54 per cent increase in demand in the first half of the year.

Matthew Turner, precious metals analyst at Macquarie, said the rise in gold exports had closely tracked outflows of the metal from exchange-traded funds, a popular investment product which helped to popularise gold when they were launched a decade ago.

"If investors don't want the gold, it has to go somewhere else," said Mr Turner. "The Chinese are simply willing to pay more for it."

The large-scale shift of gold out of Western trading hubs toward Asia has led to a spike in business for traders and refiners.

The London Bullion Market Association said that the daily cleared trading volume on the London market by its members hit a 12-year high of 900 tonnes -- worth $39 billion -- in June on the back of "strong physical demand particularly from China and India."

At the same time Swiss gold refiners, such as Metalor, Pamp, Valcambi, and Argor-Heraeus, have enjoyed a boom, melting down large 400-ounce bars from London vaults and reprocessing them into smaller products that are preferred by Asian buyers.

"The Swiss are running three or four shifts to keep the refineries going non-stop. They're throwing bodies at it," said one senior gold trader.

Gold prices touched a two-month high of $1,384 a troy ounce on Monday amid hopes that the recent wave of investor selling was beginning to slow.

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