Demand For Gold In The East Remains Explosive

One of the most noteworthy facts about the gold market in 2012 was undoubtedly the staggering amounts of gold imports. As reported numerous times on this website, China imported more than 800 tonnes of gold from Hong Kong. To get the real amount of gold that China has added to their reserves, one should add China’s own production and their unofficial imports.

Today, another astonishing figure hit the wires. This time it is Dubai who announces a staggering $ 70 billion of gold traded in their Dubai Multi Commodities Centre in 2012. Bullionstreet reports today:

“Analysts said Dubai became one of the world’s top gold destination in the last decade since then hundreds of gold trading, refining and jewellery manufacturing companies have moved to the emirate. Dubai has positioned itself as a global hub for the gold trade with the DMCC and its Gold and Commodities Exchange at the heart of operations.”

Over to China, where today the imports out of Hong Kong were published. Mineweb cites the Hong Kong Census and Statistics Department, announcing that 97.106 tonnes were imported in February 2013. That is almost twice the amount that was imported the previous month, 51.303 tonnes. Mineweb writes:

“The net gold flow from Hong Kong to China stood at 60.958 tonnes, after excluding 36.148 tonnes of imports from China, based on the data. In January, the net flow hit a three-month low of 27.336 tonnes.”

Furthermore, attempts by the Indian government to reduce the physical gold trade seem not to achieve the desired result. Indian Times reports today that smuggling has significantly increased due to the import duty which was set at 6% recently (up from 0%). Mainly the gold bars that have no serial number are being smuggled.

According to Robert Blumen, it is crucial to note that gold demand implies merely a shift from hands. The newly mined gold supply is a small fraction of the total above the ground gold supply (let’s say 1.5%). Therefore, an increase in gold demand in for instance China implies that most of it comes from a previous holder. It is important to take this insight into account when reading about an increase or decrease in gold demand.

To us, this evolution simply explains that  gold is leaving the West and is massively hoarded in the East. We wrote that Gold Goes Where The Money Is in which we quote James Steel:

“Gold goes where the money is; it came to the United States between World Wars I and II, and it was transferred to Europe in the post-war period. It then went to Japan and to the Middle East in the 1970s and 1980s and currently it is going to China and also to India.”

The trend is crystal clear, at least for those who are willing to “see” and “understand”.

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