Gold ETF Holdings Gobbled Up By China- Where Is The Gold To Feed Golden Dragon In 2014?

GoldCore's picture

Today’s AM fix was USD 1,229.50, EUR 892.62 and GBP 754.57 per ounce.
Friday’s AM fix was USD 1,222.75, EUR 891.22 and GBP 750.89 per ounce.

Gold rose $11.10 or 0.91% Friday, closing at $1,237.60/oz. Silver climbed $0.18 or 0.92% closing at $19.70/oz. Platinum fell $1.05, or 0.1%, to $1,357.70/oz and palladium fell $0.72 or 0.1%, to $714/oz. Gold and silver were both up for the week at 0.72% and 1.13%.


All eyes are on the FOMC this week and speculation is high that the Federal Reserve may taper. Fed policymakers gather for the last time in 2013 for a two day policy meeting that concludes this Wednesday.

The dreaded 'taper' is becoming a bit of a caper as the death of QE is greatly exaggerated. While a taper is indeed possible, any reduction in bond buying is likely to be small and of the order of less than $15 billion. This means that the Fed is likely to keep its bond buying program at close to $70 billion per month which is still very high and unprecedented for any industrial nation in modern history.

This still high level of debt monetisation, in conjunction with continuing zero percent interest rate policies is bullish for gold.

Gold in U.S. Dollars, 10 Day - (Bloomberg)

Gold was higher last week which was positive from a technical perspective but as of late morning trading in London, there has been, as of yet, little follow through.

The dollar looks overvalued, considering the overly indebted U.S. consumer and government, and is likely to come under pressure again in 2014 which will support gold and could lead to a resumption of gold's bull market.

2013 has been a torrid year for gold and it is down 26%. Given the still strong fundamentals, we are confident that in a few years, 2013 will be seen as a mere blip in the context of a long term, secular bull market which will likely see gold prices have a parabolic peak between 2016 and 2020.

ETP liquidations have been one of the primary reasons for gold's weakness in 2013. ETP holdings may continue to fall as more speculative investors reduce allocations to gold and some ETP buyers sold in order to move to the safety of allocated gold.

However, the supply demand data clearly shows that ETP liquidations are being matched by robust global demand, especially in China. Even if ETP holdings dropped by another 300 plus tonnes in 2014, average Chinese imports through Hong Kong alone are running at well over 100 tonnes per month.

Outflows of gold from ETFs amounted to 24.3 million ounces, nearly 700 metric tonnes, in 2013 from their peak at the end of 2012. Much of this gold was taken out of ETF holdings in London and shipped to refineries in Switzerland, where it was melted down and made into kilogramme bars, then sent to Hong Kong and ultimately to China.

Imports from Hong Kong to China totaled 26.6 million ounces or 754 metric tonnes through September alone. It is unknown where the gold would come from to replenish these ETF holdings were there a sudden surge in demand in the West in the event of a new sovereign debt crisis or a Lehman Brothers style contagion event.

Global Asset Performance Since ZIRP Began 5 Years Ago

Despite the 26% fall in 2013, gold is 44% higher in the last five years and has protected those who have bought it as a long term hedge and financial insurance against macroeconomic, systemic and monetary risks.

There is much negative noise and sentiment towards gold due to the recent price falls. The smart money ignores this noise and continues to focus on the long term. We are confident that gold will again perform well in the coming five years and protect investors from the considerable risks lurking out there today.

It is worth noting that gold fell 25.2% in 1975 (from $187.50/oz to $140.25/oz) and many experts pronounced the death of the gold bull market. Experts such as economist Milton Friedman warned that gold prices could fall further.

Gold in U.S. Dollars in 1975 - (Bloomberg)

Gold subsequently rose 6 times in the next 4 years - from January 1976 to January 1980 -  proving many extremely wrong.

A historical perspective is valuable today and history does not always repeat but often rhymes.

The death of the gold bull market is greatly exaggerated.
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SAT 800's picture

Marc Faber on a interview on Dec. 13th., actual; When Mexico, Argentina and Brazil printed a lot of money the stock markets went up very high; but you didn't make any profit in US Dollars; which were the real money of the time. Now there is no real money; in 2014, with the recent downpricing of Gold, (and I'm going to add, Silver, as it's situation is the same, only more so), I would think Gold looks very attractive here. I would add to that when stock prices come down, they come down faster than they went up, and while the US market may rally another 10%, it's no good on a profit/risk analysis. The higher the prices the harder it is for them to rise. You always want to be buying the thing that's beat up and taking profits in the thing that's too high. A person that cancelled all their Stock Market positions today and put the proceeds in vaulted Silver Bullion would proabably not have anything to complain about next Christmas.

Fishhawk's picture

We are still in the harvest phase of the gold market.  Prices will drop (have dropped) until all the weak hands are forced or intimidated into giving up their positions.  When all the available gold has been harvested at low price, then and only then will the banksters consider the next step, which is to revalue gold closer to its 'real' value as the backing for all the trillions of new paper debt instruments which have been created without any backing.  Gold (and Bitcoin) going to $50,000, coming to a theatre near you, sorta soon...

Also note that the banksters used to be able to suppress the gold price by forcing the miners to hedge future production (to protect the banksters loans to the miners).  That hedging stopped when gold rose, and the banksters lost control of the miners.  Now during this harvest, who do you suppose is buying up the miners as the small investors are giving up and taking huge losses to get out before they 'go to zero'?  When the turn comes, the banksters will own most of the currently producing miners.  Nationalize the miners?  No need, the banksters are the government...


MeelionDollerBogus's picture

I can see bitcoin to 50k if a loaf of bread was at 100k. I can't see gold to 50k. It's too precious: once the value goes to that level of purchasing power I'd guess above 7k we may see dollars fail so there's no dollar price for anything, not bread, not gold, nothing.

It's a fine sticking point as the purchasing power will be there in that scenario but not what some people would expect.

fijisailor's picture

All those gold bars the Swiss refineries are melting down and not one word out of them about how many are tungsten filled.  Either they are not finding any or they are sworn to silence by TPTB.

tenpanhandle's picture

The tungsten bars are left on the shelves for show and tell.  I'd be surprised to learn that anyone was dumb enough to actually try to sell a 400 ounce tungsten bar to the chinese - at least at this date. 


Its like the fake plywood tanks built and placed in WW11.  They were used to misdirect and deceive but no one tried to drive one into battle.

Clint Liquor's picture

Meanwhile, the new CEO (ex-Goldman Sachs president) of the world's largest Gold miner is in China begging for a 'partnership'. Barrick's Pascua-Lama project announce they are laying off 1,500 workers.The project estimated cost has doubled to $8 billion.

PM miners around the world are shutting down exploration, postponing new projects, scaling back mining and laying off workers. I wonder if China will not only end up with all the available physical, but the production as well.

overmedicatedundersexed's picture

does it mean anything when IAG stops it divi? why is nsm next?

rosiescenario's picture

Is there any reason why China would choose to reduce its gold purchases during 2014? All the arguments I read for increasing gold's price hinge on Chinese buying. If we saw a significant fall off in the demand for Chinese products, would that affect their gold purchasing?

bardot63's picture

All the arguments...??  No, not all.  #1, China isn't buying gold to sell.  They are buying gold to protect themselves and to bolster their own currency.   They ain't gonna stop accumulating all the gold they can vacuum up around the world.  Not gonna stop in your lifetime.    And #2, the arguments go way beyond China.  They include a US Federal government which is lying about everything from unemployment to GDP to inflation to market manipulation to you can keep your doctor to the dollar is safe to we really ain't spying on your emails.  They include the fact that every bank on the planet is bankrupt and every nation is bankrupt.  They include now published and now public plans to steal your money right out of your bank accounts all across the globe which is the final desperation.   They include sabre rattling in the MidEast and the FarEast.   They include nation after nation quitting the dollar and using other currencies (like gold) for international payments.  So, all the arguments are not centered on China, and even if they were, China ain't gonna stop stacking.   Not in your lifetime.  They have 1.3 trillion dollars they don't want.  They don't really care what gold will cost in coming years.  They intend to get most of it using the dollars they don't want to hold.


Clint Liquor's picture

There are two 'reserve' currencies that central banks hold today. USD and Gold. The value of USD is; How much Gold it will purchase. USD is 35% more valuable when Gold is $1200 than $1900. Gold price does not hinge on Chinese buying because although it produced, it is not a commodity. Gold is money used to benchmark fiat currencies. So, the question is not will China buy Gold, it is; Will the value of the USD increase or decrease.

SAT 800's picture

I'm thinking we may see the US dollar "increase" in valuation, in the new wonderful world of competitive paper, as it will probably gain in exchange against the Euro and the Yen; in the case of the Yen, for obvious reasons, in the case of the Euro, for exactly the same reasons; which are not so obvious or so gross in scale, but neverthless, identical. At the same time We can see Gold and Silver maintaining their recently defined bottoms and rallying periodically; the next phase will be a downwash in the dollar indicated by an increase in bond yields, the ten year is at twice the yield it was at a few years ago, and clear cut bull market in the metals. Perhaps towards the end of 2014.

Conax's picture

Recasting the bars to kilos kills two birds with one stone. 

They can't be reabsorbed into the LBMA because they are in the wrong form,

and they will be without their tungsten cores.  Every week this price action continues, worsens the damage to the future of this country- therefore I'm sure it will be maintained until it can't.

Good job, Ben, you lousy rat.

SAT 800's picture

I don't know why you got downticked for your opinion on Friedman. If he wasn't a Moron, he was certainly a very expensive mistake as a government adviser; he seems to be one of those over-educated fools who specialize in getting everything upside down and backwards. And then, of course, there's his legacy as a professor, producing his student, Bernanke. All in all, a disaster. With friends like Friedman, you don't need enemies.

swanpoint's picture

I will never sell.

new game's picture

Outflows of gold from ETFs amounted to 24.3 million ounces, nearly 700 metric tonnes, in 2013 from their peak at the end of 2012. Much of this gold was taken out of ETF holdings in London and shipped to refineries in Switzerland, where it was melted down and made into kilogramme bars, then sent to Hong Kong and ultimately to China.


seems like a lot of fucking around. contractor/middleman (smelter) getting rich once again-value added??.

suppose china would rather have gold than worthless treasuries-makes sense.

history repeat>didn't america fill fort knox with gold?

things that make you go hmmm.


tenpanhandle's picture

Ft Knox now full of GLD.  All real gold in ETF already gone.

new game's picture

10 b taper a coming for only reason-to maintain confidence in the policy.

i know it makes NO sense, but hey does any of it make any sense.


Alea Iactaest's picture

China will puke up its gold in the coming crash. That is the whole point of this exercise. Turn them into debt serfs along with everyone else.

All that shadow lending is as big a house of cards as the West's chain of rehypothecation.

Fed's new motto: AYBABTU

Toolshed's picture

What? I think you should elaborate on your comment, since on the surface it sounds quite absurd.

Alea Iactaest's picture

Why else would the West be so happy to ship gold East? Lots of reasons, but the simplest is, "because they know they will get it back."

Remember: "money returns to its rightful owner." Western bankers are lots of things but dumb isn't one of them. There is plan, it just hasn't been disclosed.

MeelionDollerBogus's picture

"Remember: "money returns to its rightful owner." "

Not that I've ever seen. It moves & it has no guarantee of returning to where it came, and rarely does.

Dumb? Yes, western banksters CERTAINLY ARE. They are without morals but they didn't get brains to fill the void.

Mad Mohel's picture

The madmen are running the asylum son. They don't think hey are getting anything back. Hell in their estimation they don't need it, because their word is better than gold. That is the sick and twisted system they want to maintain. Their promises are better than any money.

Now the Chinese are no fools and they know the real score, the words of Western bankers and politicians are worth less than used toilet paper. And you better believe they are laying in wait for when this bitch jumps the tracks.

Clint Liquor's picture

China will puke up it's USD and UST in the coming crash.

Fixed it for you.

Toolshed's picture

That definitely sounds much closer to the truth. Maybe throw in a few nukes and stir vigorously.

eddiebe's picture

Friedman was a moron.