The UK’s gold exports have surged nearly tenfold this year as investor selling drives the bullion out of London vaults into the hands of Asian consumers.
Britain’s gold exports to Switzerland, the hub of the gold refining industry, surged in the first half of this year. Bullion being sold out of exchange-traded funds may be heading for Swiss refineries before being sold on in Asia.
U.K. gold exports to Switzerland exploded from 92 tonnes in all of 2012 to a whopping 240 tonnes in May this year alone and a very large 797 tones in the first six months of 2013.
“The UK does not have gold mines, so where has it all come from? The obvious source is the gold exchange-traded funds (ETFs), most of which hold their gold holdings in London vaults, and which saw huge outflows in 1H 2013,” Australian bank Macquarie said.
“And why is it going to Switzerland? Two explanations make sense. One would be that investors have decided to switch their gold investments from ETFs to allocated deposit accounts, which are often held in Switzerland.”
The recent price fall has stimulated a increase in demand in Asia, particularly China, whose gold association reported a 54% increase in demand in the first half of the year.
It added: “But a bigger factor, we think, is that the gold bars from ETFs have gone to Switzerland, where most of the world‟s gold refining capacity is, to be remelted into different size bars and coins and then sold on end consumers, predominantly in Asia, specifically China and India.”
Gold ETFs – popular investment vehicles which issue securities backed by physical gold – posted their biggest outflows of metal on record in the second quarter. Data from the World Gold Council showed outflows of 402.2 tonnes of bullion between April and June.