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The Trade Numerologist: The Gold's in the Mail

17 January 2018 John Miller

For the all the razzmatazz around bitcoin, non-crypto humans still ship a lot of their wealth around the world in auriferous rock. 2017 was a decent year for gold, by some measures its best since 2010. Prices rose around 10 percent, and that was more than expected given robust employment and economic growth in the world’s richest economies. Analysts credited the lukewarm dollar, and nervousness about geopolitics, particularly the situation with North Korea.

But gold is not just an investment, or a way of storing your savings in a bank. It’s also a practical way of moving wealth from one region to another, and the migration of massive gold stocks from the Americas and Europe to Asia mirrors this century’s transfer of relative wealth toward the Orient.

Even though you could fit all the gold ever mined into a large swimming pool, the global gold trade is worth hundreds of billions of dollars a year. Asian countries are especially hungry for gold, particularly Chinese investors concerned about the devaluation of the yuan. Most of what they buy comes from the West. The world’s top gold exporters are Switzerland, Hong Kong, the US, Canada and the UK, according to IHS’s Global Trade Atlas.

Top gold exporters, first 9 months of 2017

Switzerland$48.5 billion
Hong Kong$42.6 billion
US$15.5 billion
UK$13.6 billion
Canada$13.5 billion
Australia$9.8 billion
Singapore$7.8 billion
Japan$6.7 billion
Turkey$5.8 billion
Thailand$5.1 billion

Switzerland, land of chalets, cheese and banks, is the nexus of global gold trade, with dozens of banks and other firms doing all varieties of gold business, from melting scrap into bars, to storing and flipping gold between clients. Swiss firms like Argor, Valcambi and Metalor make up half of the roughly dozen refiners that dominate global gold trade. These companies got their starts supplying metal to jewelry makers in the North of Italy, and Swiss watchmakers.

The Alps are a stopping point for a broad trend this century of gold moving from west to east. Since 2012, the Chinese, in particular are buying a lot of gold from Switzerland. Exports have increased from virtually nothing in 2011 to 221.7 kg, or $8.9 billion worth, over the first nine months of 2017.

Swiss gold exports to China, first 9 months of the year, 2012-2017

201217.6 kg
2013219.4 kg
2014111.1 kg
2015187.6 kg
2016229.5 kg
2017221.7 kg

To be sure, Hong Kong, which is part of China but reports separate trade statistics, is ground zero for Asian gold trade. All the gold that ends up in Hong Kong can come from anywhere. Because people tend to not throw away gold, and because freshly mined supplies are scarce, the gold supply chain is uniquely diverse. Take Grandma’s necklace in Columbus to the local cash-for-gold shop, and within months, it might be part of a gold bar being traded from Switzerland to Hong Kong in exchanged for corn futures. The US is the world’s top exporter or precious metal scrap.

Precious metal scrap exports, first 9 months of 2017

US$2.5 billion
Japan$1.6 billion
Malaysia$904 million
UK$801 million
Germany$799 million
Canada$771 million
Indonesia$590.5 million
Singapore$521 million
Belgium$455 million
Australia$416 million

Scrap, it must be said, is only a small part of overall gold supply. Three-quarters still comes from mines, according to the World Gold Council. Mined gold generally increases when prices rise and are able to pay for more aggressive and sophisticated digging and extracting.

Switzerland, naturally, is also the world’s top gold importer, followed by the UK and its banking mecca London, India, Hong Kong and Turkey.

Top gold importers, first 9 months of 2017

Switzerland$56.3 billion
UK$27.1 billion
India$26.7 billion
Hong Kong$26.7 billion
Turkey$23.2 billion
Singapore$13.2 billion
US$9.2 billion
Thailand$7.9 billion
Canada$7.3 billion
Australia$4.3 billion

India, which has a booming jewelry business, and hundreds of millions of people joining the middle class, is considered the world’s most promising gold market. Indians have a cultural affinity for storing their wealth in gold. Despite concerns that gold coming from places like Ghana and Tanzania is being used to fund militias – so-called conflict gold – Indian buyers haven’t shied away from placing orders from developing countries.

India’s top gold suppliers, first 9 months of 2017

Switzerland$13.7 billion
United Arab Emirates$3.4 billion
Ghana$1.9 billion
US$1.5 billion
South Africa$1.4 billion
Peru$979.7 million
Tanzania$457.6 million
Bolivia$395.6 million
Burkina Faso$394.4 million
Australia$354.2 million

Gold prices, usually volatile, were stable in 2017, trading within a narrow band. That should prop up the aural rock’s value as Western countries enter more unstable political phases. And while gold, which is light for its value, does not present huge opportunities for shipping and logistics companies, you can bet on it remaining one of the world’s most important traded rocks – and currencies.

What topic would you like the Trade Numerologist to cover? Email tradenumerologist@gmail.com with comments and questions.

The Trade Numerologist is IHS Markit’s unique weekly look at global trade by award-winning journalist John W. Miller, formerly of the Wall Street Journal, using proprietary numbers from IHS Markit’s Global Trade Atlas database, the world’s most complete and accurate set of trade numbers.

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