2013 has been the year that China has lit the physical gold market on fire; however you would never know from the metal’s price performance. While the price of gold has fallen more than 20%, bullion flow to the East has been nothing short of spectacular. Recently published data supports our presumption that physical gold was indeed flowing from ETF liquidations with a significant amount heading East.
We have written much this year on the gold market and the flow of the yellow metal to China. A quick review of the titles of our missives highlights our fascination with gold market developments over the past year. Many of these articles outline the massive shift in the gold trade from West to East. But it was in our piece entitled “Redemptions in the GLD are, oddly enough, Bullish for Gold” where we first postulated that elevated premiums for gold in China, the so-called ‘Shanghai premium’, were driving redemptions in the world’s largest gold ETF with the physical gold being used to satiate Asian demand. We asked the question in July, when we wondered what the link between China’s increasing physical gold deliveries and the drop in gold inventories within the COMEX and GLD ETF was, but any proof remained elusive.
To read this interview in full please click here.
In September 2011 the Gold Bugs index, the HUI stood at 630 as gold prices peaked, since then both have trended lower with the HUI losing about 65% of its value. The bottom has been called a number of times and after such a dramatic decline its difficult not to think that we are there now. However, as we all know the timing of any investment is crucial to its success and that is exactly what we are trying to do here, trying to pick advantageous entry and exit points. If you would like to know which stocks we are buying and selling please join us at ‘Stock Trader’ our premium investment service.
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