Gold has started 2014 on a shiny note, up 3%. But gold bugs still have to live with the metal’s annual loss in 2013—its first in in 13 years. They once more hear the bears’ taunt that gold is a “barbarous relic.”
But as the price fell last year, someone was buying. Christopher Wood, a noted gold aficionado at CLSA, reckons gold is moving from Westerners who own “paper gold”—through exchange-traded funds—to Asians who want physical bullion.
It seems traders are refining ETF gold into smaller bars that Asians prefer and exporting it out of Switzerland, one of the world’s biggest refining hubs, Mr. Wood says. Hong Kong imported more than six times as much gold by weight from Switzerland in the first 10 months of 2013 as in the same period a year earlier.
As ETF investors bailed, consumers in Asia outside Japan bought 28% more gold by weight in the first three quarters of 2013. This official figure possibly understates demand since India—which made up nearly half of Asian buying in 2012—raised its curbs on gold imports, which has encouraged smuggling.
It may be that Asians are looking for a hedge against local inflation. Or perhaps, with prices dropping, they see a deal on fancy jewelry. Either way, they think owning this relic is glorious.
courtesy of thewallstreetjournal
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