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LAWRIE WILLIAMS: Only 20% of latest Swiss gold exports going to Asia

Readers who have been following our coverage of Swiss gold eports will be aware that in ‘normal’ past trading months around 80% or more of Swiss gold exports have been destined for Asian markets - particularly to China, Hong Kong and India. However in the past couple of months this has not been the case, perhaps demonstrating something of a sea change in the markets.  In both July and August by far the biggest recipient of Swiss re-refined gold has been the UK - a factor the ‘experts’ have put down to particularly strong demand from the gold ETFs, many of which have their gold vaulted in London,

Indeed in August, the Swiss refineries took imported more gold from Asia and the Middle East than it exported to what have, over the years, been the biggest recipients of Swiss gold exports.  In the past month the biggest exporters of gold to Switzerland have been The United Arab Emirates (26.8 tonnes) and Thailand (16.5 tonnes) - both typically net gold importers.  Meanwhile total Swiss gold exports to all Asian and Middle Eastern nations combined only amounted to 22.6 tonnes.

True, China – for the past few years the biggest importer of Swiss gold – has reportedly being restricting gold imports (although as the world’s biggest gold producer it can presumably meet domestic demand from its own sources). But the return of gold to Switzerland from traditional importers like the UAE and Thailand, suggests some liquidation and profit taking by local traders and consumers.  The gold price has risen almost 20% so far this year giving a decent margin for profit taking, but also suggesting that the eastwards gold flows are not into quite such firm hands as suggested by many gold commentators.  Conversely the big flows into the UK, if indeed these are due to gold ETF demand, suggest more of a geographical balance re-appearing for gold demand.

Obviously we will keep an analytical eye open on the future of Swiss gold exports.  There appears that there may be a slight shortage of gold bullion availability in China currently – gold price premiums there are said to be at near record levels, and there are reports that China has been relaxing its strictures on gold imports.  Thus perhaps we will see an uptick in Chinese imports from Switzerland in the months ahead.  But if the gold price remains strong, and rises further, as some analysts are predicting, we could see heavy flows into the UK continuing thus affecting the  short term supply/demand balance accordingly.

On the other hand, there is some evidence that central bank gold buying from the two biggest gold accumulators – Russia and China – may be diminishing slightly.  There seems to be little strong evidence that global new mined gold supply is actually beginning to fall yet (peak gold) but is perhaps still marginally growing.  Countries like Australia, Russia and Canada are seeing gold production increases offsetting declines elsewhere. 

So the supply/demand balance is only changing subtly with factors like ETF demand offsetting other declining factors.  This suggests that the gold (and silver) price path will remain heavily dependent on investor sentiment, which seems to be improving by the day as global equity market nervousness in the face of a likely global recession, and ever-present geopolitical uncertainties, lead to increasing safe haven demand.  In our eyes the future for gold and silver prices still looks positive – pgms perhaps less so because of their industrial demand sensitivity and if there is a recession they will be affected adversely.

23 Sep 2019 | Categories: Gold

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