real demand

PHYSICAL GOLD DEMAND:

China: Shanghai Gold Exchange doubled deliveries to customers in 2013 to 2197 tonnes. Gold and silver jewellery retail sales rose 17% in December 2013 (yoy), according to NBS data. Given the yuan gold price was 20-30% lower in December (yoy), implies gold vol rose ~50%. Full-year sales rose 26% yoy.

India: Throughout 2013 India’s ruling National Congress party increased import restrictions, reducing official demand by ~65%. India was previously the largest gold market in the world. However Indian gold smuggling is booming. After a recent flight from Dubai, every passenger was found to be carrying ~1kg of undeclared gold! On another flight, ~US$1m worth of gold was found stashed in a toilet after passengers alighted. Meanwhile Thai gold imports have ballooned – much of which is thought to be headed to India along the overland route. Worth noting National Congress party chief Sonia Gandhi recently asked her government to ease gold import restrictions in order to boost her party’s chances at the upcoming elections.

UK: This month the UK Royal Mint ran out of 2014 Sovereign gold coins. The UK Jewellers Trade Services reports “extremely high demand for British gold coins” from Italy, Greece and the UK.

Germany: In 2012 Germany asked the US Fed to return 300 tonnes of their gold stored under Bernanke’s New York desk. The Fed replied “it’ll take 7 years”. So far, only 5 tonnes has been returned. Hmmm.

Austria: Sales jumped 36% in 2013. Their Mint is running 24 hours per day to satisfy demand.

US: Mint sales of American Eagle gold coins rose 14% in 2013.

Australia: Perth Mint (running 3 shifts/ day) sold 41% more gold in 2013.

Turkey: Gold imports rose 64% in Dec - the highest since July according to the Istanbul Gold Exchange.

GOLD v PAPER ASSETS: Following chart compares the value of already mined gold to total financial assets (paper assets). It should be ringing alarm bells everywhere. Whereas historically physical gold represented ~20% of financial assets, today it is just a fraction of paper claims.