by Lawrence Williams,

ZURICH, February 9, 2015 (TSR) – Although it doesn’t mine any gold itself Switzerland, by virtue of having four of the world’s biggest gold refineries – Argor-Heraeus, Metalor, Pamp, and Valcambi – is the world’s largest importer and exporter of gold. Much of these refineries’ business is receiving gold in different sizes and from diverse sources from around the world and re-refining it into smaller sizes which are more marketable in Asia and the Middle East in particular.

Last year, for example, according to the latest published figures from the Swiss Customs Administration, Switzerland imported over 2,200 tonnes of gold and re-exported around 1,750 tonnes of this total. Unsurprisingly to followers of the gold market, China (including Hong Kong) was the biggest export destination, followed by India. See table below for a breakdown of the top 10 national recipients of the Swiss exported gold, which between them account for over 90% of the total.


Table: Top 10 recipients of Swiss gold exports

Source: Swiss Federal Administration and
Source: Swiss Federal Administration and


For the past several years, Hong Kong has been the principal route for Chinese gold imports – indeed was so dominant in this respect that global precious metals analysts used the published Hong Kong gold export/import data as their primary representation of Chinese gold imports, and Chinese demand, it seemed, was calculated by adding the Hong Kong figures to China’s own production, plus estimates of amounts of gold being produced by Chinese refineries from their huge base metals concentrate imports and some direct precious metals concentrate imports, plus an estimation of internally recycled scrap. From all this one had a pretty good idea of the total amount of gold coming on to the Chinese market.  True, a small amount of gold was imported directly – but no statistics were available for this and the amounts were seen as relatively insignificant.

Last year China changed the rules, leading to ever more gold being imported directly via ports of entry such as Shanghai and Beijing. But because the Chinese don’t produce statistics on this the world didn’t know how much was coming in in this way and some analysts, and the mainstream media, have still tended to look on the Hong Kong figures, which continued to be reported monthly, as their proxy for total Chinese imports. Last year these imports from Hong Kong fell by 32% and, le voila, the impression which mainstream reports and analysis came up with gave the implied suggestion that Chinese gold demand overall fell by a similar percentage.

But, to counter all this Shanghai Gold Exchange total withdrawal figures, which somehow seem to be ignored by much of the mainstream media and analytical community, suggested that Chinese demand was holding up remarkably well overall and was only down around 2-3% on the previous year. Why were the figures so different?

The answer to our mind is that the figures were different by the amounts of gold now being imported directly into China directly rather than via Hong Kong – but the Chinese, as noted above, don’t publish this data. But other countries do! Hence the importance of the Swiss data showing that 36% of its gold exports to China and Hong Kong combined are now being shipped directly into mainland China. Similarly the last two available months of U.S. gold export data (for September and October) both show over 30% of U.S. exports are now also going directly to mainland China. Now maybe these figures are slightly distorted by the opening of the international section of the Shanghai Gold Exchange (the SGEI) in September, but we are not aware that such large gold volumes are passing through the SGEI – but again the SGE does not report the breakdown between the domestic SGE and the SGEI, so it is impossible to tell if there is, or is not, a serious distortion here.  Nevertheless anecdotal information from \china suggests that gold volumes passing through the SGEI remain very small.

The other interesting point from the Swiss statistics is that this small nation takes in, re-refines and then exports a volume of gold equivalent to around 56% of the world’s total newly mined annual gold supply. The volumes of gold being exported to other countries than India and China/Hong Kong are also of interest – particularly imports into Singapore and Thailand being the other two biggest Asian gold consumers (10.2%) – and Turkey, the United Arab Emirates and Saudi Arabia (11.3&) which between them are strong indicators of Middle Eastern demand, another historically prolific area for gold consumption and trade.  Between them these three latter states imported 195 tonnes of Swiss re-refined gold. These countries may also be a conduit for gold imports to Iran and Islamic State, both of which are cut off from direct gold supplies from normal sources, with the UAE (and Thailand) perhaps also being a source for gold being smuggled into India to avoid that nation’s 10% import duty on precious metals.

Our best analysis of the figures suggests that Chinese gold demand is being hugely underestimated by mainstream media and commentators, while that for the rest of the world remains very significant and that in total global demand is almost certainly exceeding global supply, perhaps quite comfortably. So where does the price go now?  Maybe it will still head downwards but for all the wrong reasons. Who in their right minds would be a gold investor nowadays? Someday we will see a major upwards correction, but it may take a very significant external factor to stimulate this. How soon this will be we don’t know, but logic suggests an upwards correction will be inevitable unless the supposedly strong hands into which gold is being delivered in the East starts to weaken under the continual downwards price pressures in the West.


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