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The United
Kingdom’s gold exports to Switzerland jumped from 85 tonnes to 1,016 tonnes in the
first eight months of 2013 — a twelve times increase. Some bullion
market watchers attribute the huge increase to withdrawals or sales from ETFs
— an explanation that covers only half the story…….if that.
Switzerland,
according to the Koos Jansen website, has exported
nearly 500 tonnes of gold to Hong Kong through
July, 2013. Hong Kong, in turn, has exported over 1200 tonnes
of gold to the Chinese mainland over the same period. Now, with this report
of ramped-up exports from the United Kingdom, another piece of the puzzle
falls into place and we begin to get a fairly clear picture what these gold
mobilizations entail. Switzerland and Hong Kong are acting as a conduit of
western gold on its way to China — and probably Chinese central bank
reserves.
To what extent this
gold mobilization is the result of some yet-to-be-identified external
pressure on London’s bullion banks, or simply business as usual,
remains to be determined, but gold movements of this size usually do not
occur in a vacuum. Hedge funds have been in the gold ETF liquidation mode
since April, at the behest, it seems, of certain bullion banks that have
issued generalized ETF sell recommendations to their clientele (which
includes the funds). The ETF selling has been blamed repeatedly for the rapid
drop in the price. If all of this has been a ploy to drive down the price on
paper and channel substantial amounts of physical gold to China, who is the
winner in this game and who is the loser? And why is it being done?
The gold market is
incurably opaque (no matter how diligent or persistent the arguments to the
contrary that it isn’t or that it should not be), and that is probably
why so many are intrigued by it. Yet, at the same time, those who innocently
own gold for asset preservation purposes can rest assured that they will never
become collateral damage in these affairs as long as they do not allow
themselves to lose patience or forget the reasons why they purchased gold in
the first place.
Gold is never sought
by those who think all is well with the world. It is sought by those who
believe that things could go wrong, or indeed, that things have already gone
very badly. That true believer might be someone of incredible private wealth,
as was the case with Bernard Baruch in the 1930s, or it might be a great
nation-state like Germany or China today. When the sitting Secretary of the
Treasury asked Bernard Baruch why he was buying so much gold, the reply came
quickly that he “was commencing to have doubts about the
currency.” China and Germany, no doubt, are acting on doubts of their
own. Up until today, we were unaware of the degree to which those doubts had
manifested themselves in the hidden corridors of the world gold market. . .
.Now we know. In the first eight months of 2013 China produced 270 tonnes of gold from its mines, and theoretically almost
four times that amount through its London – Zurich – Hong Kong
gold conduit. In future years, this will likely be considered a major
financial coup d’etat.
Link to Reuters
article “Gold
exports to Switzerland surge as investors sell ETFs”
Also see related: Euro,
yuan swap deal comes in under the radar, but log it
for the future
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