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Physical gold continues to leave London

Julian Phillips says physical gold continues to leave London, to be re-refined into smaller bars and then shipped to Asia.

Price Drivers

Physical gold continues to leave London, to be re-refined into smaller 1Kg bars and then shipped to Asia, as reported for January of this year, confirming that Far East demand to acquire gold persistently [almost irrespective of the price] continues and will continue in 2014.

While the Chinese government remains inscrutable on its holdings of gold, they continue to encourage its acquisition by its people. The development of the distribution systems of gold across the country moves on constantly, as does the number of importers allowed to bring it in. They have even licensed non-banking importers so long as they import more than 10 tonnes a year. It is clear by the nature of the power of the Chinese government that should they require their citizens to do so, a decree ordering them to hand their gold to government [against payment] would be obeyed, nearly completely. So it is relevant how much gold is entering China overall. Why?

In January, China sold around 3.5% of their U.S. Treasury holdings [$47.8 billion] in a growing program of diversifying into other currencies and assets. [We discuss this fully in the next issue of the weekly Gold Forecaster] ahead of the full convertibility of the Chinese Yuan. Because China will not work in cooperation with the U.S. on this [leaving the $ dominance intact], desiring their independent position in the currency world, we expect considerable turbulence and volatility in the currency world when this happens. At that time the ‘peg’ to the dollar will be lifted, but don’t expect the Yuan to appreciate then [that would be against Chinese interests]. It is all part of a long-term plan to position the Yuan to be a global reserve currency, next in importance to the dollar.   

There were no sales or purchases from or into the SPDR gold ETF [GLD] but 0.64 of a tonne purchased into the Gold Trust, which left their respective holdings at 795.610 tonnes and 164.24 tonnes.

Silver – The silver price is proving more robust than the price of gold as both rise.

Julian Phillips is the founder of www.GoldForecaster.com and www.SilverForecaster.com

 

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