Sucked dry

Bloomberg reports that gold investors are “giving up hope”. Speculators in the gold futures market are making record bets on a crash…

But if you tune out the noise of the media, hold your breath, and listen very closely… you can hear the gold being hoovered out of the UK… by those that truly value it.

Take a look at this – Swiss gold imports from last month:

To be clear, it’s not the Swiss that are sucking the gold out of the UK. To continue the metaphor, Switzerland is the straw. Gold is going through it on its way to somewhere else.

Switzerland is a fulcrum of the precious metals industry. It’s a bit like London for banking, or Los Angeles for films. The majority of the world’s gold is refined there, as is all the infrastructure required for that refining.

This can be the refining of rough gold from mines (known as “doré”), or the re-refining of existing gold bars to a higher purity. As the UK has no active gold mines (although one is being developed in Tyndrum), the 67 tonnes we lost last month will have been drained from British vaults for re-refining.

As for where all that gold went, one need only take a look at Swiss gold exports, below:

 

As you can see, China and India are filling their boots.

Perhaps they see that commodities are looking ludicrously cheap relative to stocks…

Perhaps they don’t see the dollar maintaining its role as the global reserve currency, what with the US government staring up at a mountainous $100 trillion in obligations…

Or perhaps they see a different risk on the horizon. My publisher Nick O’Connor recorded is recording a webinar with Nick Hubble on “Bloody October”, the month that threatens to brutalise the eurozone and financial markets with it. Get your name down to watch it at 2pm by clicking here.

Gold doesn’t stay where it’s undervalued. While the financial press are giving gold a beating, the East is draining Western gold inventories through a Swiss straw. This likely won’t matter, until it matters.

“We must all live by The Golden Rule… Whoever has the gold, makes the rules.” a king says in a Texan comic strip from the 1960s. Time will prove him wise.

All the best,

Boaz Shoshan
Editor, Southbank Investment Research

Category: Investing in Gold

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