March 2014

Swiss refiners working 24/7

While everybody has been focused on the (falling) "price" of gold during 2013, perhaps the most important story missed has been the "flow" of gold, more specifically the flow from London over Switzerland over Hong Kong to China, as gold is moving from west to east and from the western banking system into strong store of wealth hands in Asia. Swiss gold refineries have been particularly busy recently running 24 hours a day, as they recast 400-ounce bars that constitute good delivery in the London and New York bullion markets into smaller kilo bars preferred by Asian buyers. During January 2014 Switzerland imported CHF4.32bn (USD4.87bn) of gold and silver bullion from the UK, and exported more than 80% of the recast metal to Asia, with Hong Kong being the top destination.

The reason why this should be of interest to investors is the simple fact that, while Westerners tend to trade shorter term, worry about price drops and easily tend to "throw in the towel" in fear, the majority of Asians think long term, welcome the discount to increase buying and are rather unlikely to want to give it back, i.e. the gold they purchase may not be available again to the market for many years, if not decades to come. Therefore, it appears to be only a matter of time before Western reserves currently supplying gold-hungry Asia run out, and a price surge of the yellow metal occurs.

Martin W. Hennecke Group Chief Economist

Shanghai | Hong Kong | Singapore | London THE WEALTH MANAGEMENT PROFESSIONALS

Read more: Respected economist, Martin Hennecke,joins The Henley Group