UK Gold Exports in 2013 were nearly double the volume of exchange-traded fund liquidation, new research shows.
Compared with only 160 tonnes in 2012, exports of physical gold bullion totaled 1,739 tonnes last year according to data reported by the UK’s HMRC tax authority to the European Union’s Eurostat agency.
More than 5 times visible UK gold imports, according to a report from Macquarie Bank analyst Matthew Turner, and equal to 60% of annual world gold mining output, that was nearly twice the outflow of gold from ETF gold trusts, which typically vault metal in London to back their shares.
The gap between gold ETF sales and UK gold exports suggests heavy sales by investors such as hedge funds and wealthy family offices, who owned metal outright and vaulted it securely in London – heart of the world’s physical bullion and silver market – with either a major bank or private specialist.
The gold price fell 28% in Dollar terms last year, the fastest pace since 1982.
Gold investment holdings in Switzerland, however – “the world’s leading gold repository,” according to The Economist magazine – may have risen overall, as exports into the famously neutral central European state lagged exports by some 300 tonnes according to data compiled today by Reuters.
Since the late 1960s, Switzerland’s imports of gold have exceeded exports by some 13,000 tonnes, according to the Swiss customs agency. The net difference has signaled much faster accumulation by foreign investors using the country to store their gold bullion property over the last decade.
“The gold market became polarized in 2013″ between Western investors selling and Asian consumers buying, said this week’s Gold Demand Trends report from market-development organization the World Gold Council.
“The flow of gold from the UK to Asia via Switzerland,” writes Turner at Macquarie, the analyst who first identified specific data confirming this trend last summer, “was a defining feature of the gold market in 2013.”
Now plotting a graph of UK gold exports against outflows from ETF trusts – which grow or reduce their metal holdings as stockholder demand creates or liquidates shares – Turner finds that “the trend has matched quite closely with a 1-month [time] lag.”
Presumably melted and recast by Swiss refiners, out of large 400-ounce London Good Delivery bars (12.5kg) into smaller “retail” units such as 1 kilogram bars, “that gold then seems to have been sent on to India and China,” Turner says, also showing a chart of Swiss gold exports to Hong Kong and India.
Switzerland accounted for 77% of the UK’s total 2013 gold exports. Hong Kong and the United Arab Emirates then accounted for a further 16% between them.
Looking ahead, “we expect ETF outflows to resume again in coming months,” says Turner. “They are likely to be only half as much” as 2013′s total of 880 tonnes.