Gold News

ETF Gold Bars "Gone East" Says UK Export Data

Massive gold selling by ETF trust funds shipped to China & India as kilo bars...
 
THIS YEAR'S huge sales of gold bullion bars from exchange-traded funds in the West have been snapped up by Chinese and Indian investors, according to a study of UK export data.
 
Primarily vaulting large gold bars at bullion market-makers HSBC or J.P.Morgan in London – heart of the world's wholesale gold market – the gold ETFs shed 650 tonnes of metal in the first six months of the year.
 
Prices sank 25% meantime as the big ETFs, led by the $60 billion SPDR listed in New York, shed one tonne in every four held at their record-high levels of end-2012.
 
"Where has the ETF gold gone?" asks analyst Matthew Turner in a report from Australian bank Macquarie. UK export data, he finds, show outflows of 797 tonnes in the first half of 2013 destined for Switzerland – center of the world's gold-refining industry.
 
There, says Turner, "We think the gold bars from ETFs [have been] remelted into different size bars and coins and then sold onto end consumers, predominantly in Asia, specifically China and India."
 
China's private gold demand totaled 706 tonnes in the first half of the year,  rising 54% from H1 2012 according to the China Gold Association. Indian demand, although hit by aggressive anti-import measures aimed at cutting the country's balance of payments crisis, likely saw gold bar imports of 615 tonnes, up from 381 tonnes between Jan and July 2012  according to data compiled by Thomson Reuters GFMS for market-development organization the World Gold Council.
 
Acting as the "clearing house" for gold traders worldwide, London vaults typically hold large 400-ounce bars. The favored form of investment gold in both India and China, however, is one-kilo gold bars.
 
Sitting between the two, Swiss refiners regularly import gold bars from London to melt and recast in the smaller kilobar format.
 
Chinese buyers in particular also demand a different purity, wanting 0.999 parts fine gold rather than the 0.995 parts of the London Good Delivery standard. Premiums in Shanghai, over and above the London benchmark price, have reached $50 per ounce in recent months as Chinese demand surged but Western investors were heavy sellers of investment gold bars.
 
Looking at current prices, "There are two good reasons for this stength in gold," said Natixis analyst Nic Brown to Reuters Insider TV today.
 
"First there's an absence of selling" following those heavy Western fund and ETF sales of Jan-July.
 
Secondly, "the technical [chart] picture is very much reflecting the fundamentals. On the buying side, there's been very good physical demand around the world."

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