US to export a record 750 tonnes of gold this year, mainly to China as local investors respond to high domestic inflation

If you want any more proof of the massive accumulation of gold this year by China then consider the latest US gold export figures. This will come as no surprise to precious metal traders or those in the industry who know only too well that world gold reserves are moving from the West to the East.

Total exports of US gold hit 573 tonnes in the first nine months of 2013, if you include the 157 tonnes listed in other categories as well as bullion, and that means around 750 tonnes will be the total for US gold exports this year.

Re-exports to China

In the first nine months of 2013 Hong Kong received 176 tonnes, Switzerland 131 tonnes and the UK 26 tonnes, according to the latest data from the USGS Gold Mineral Industry Surveys. Most of the gold sent to Switzerland and the UK was re-exported to China after refining into smaller bars as we know from earlier revelations on the website (click here).

How much gold China has bought in total in 2013 is a matter of considerable speculation in the gold industry. Lower estimates say 1,500 tonnes, upper estimates 4,000 tonnes, with the truth doubtless somewhere in the middle.

Why is China buying all this gold while the price is falling on global markets? Well some insiders say they are fixing the market to buy at a low price (click here). More likely China is experiencing a hyperinflation in local currency terms – with wage rises surging out of control and property prices on a tear – and gold is the obvious hedge against such inflation.

Chinese investors also have limited options in their domestic markets and have stayed away from stocks as inflation is smashing company profit margins. Bonds have also taken a pasting this year with interest rates surging to a 10-year high.

Exporting inflation next?

Will Chinese inflation next breakout and infect the rest of the world where ironically ultra-low headline inflation is given as a reason for selling gold this year? It is hard to say though the flight of capital from China through purchases of foreign assets by rich Chinese is growing apace.

That only has an effect at the margin. Much more important would be rises in the prices of the ubiquitous Chinese goods in world markets. That’s inevitable if local inflation continues to put upward pressure on business costs.

Certainly if Chinese inflation gets out of the bag then they are doing the right thing buying gold because its price will then only have one way to go: up and up!

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