As Bloomberg described it, many Western investors – especially at the institutional level – are getting rid of bullion. Meanwhile, Asian shoppers are taking advantage of lower prices to source cheaper jewelry, coinsand bars.
According to Bloomberg report, “Large volumes of metal are being mined from the coffers of financial centers like New York and heading east to meet demand in the Shanghai gold market or Istanbul’s Grand Bazaar.”
In fact, Asian suppliers are struggling to bring enough bullion into Asian markets. As a result, there has been a significant increase in premiums in many Asian countries. Average September premium in China hits highest monthly level in nearly six years.
“The incentive to hold gold is much weaker. It’s going west to east now,” Joseph Stefans, commercial director of MKS PAMP SA, said Bloomberg.
“We try to follow as best we can.”
New York and London vaults have reported an outflow of more than 527 tonnes of gold since late April, according to data from the CME Group and the London Bullion Market Association. At the same time, gold imports into China hit a four-year high in August.
India, Turkey, Thailand and Saudi Arabia also reported increased gold imports.
There is also a growing demand for silver in Asian markets, particularly India. The premium on silver has tripled in recent months.
We are also seeing the Asian appetite for gold in central bank purchases. Central banks around the world have been net buyers of gold for five straight months and all of the big buying has been in the East.
Turkey has added more gold to its reserves in 2022 so far than any other country. With a purchase of 8.9 tonnes in August, Turkey increased its gold reserves by 84 tonnes in the first eight months of the year. Turkey now holds 478 tonnes of gold between its central bank and treasury holdings, the highest level since the second quarter of 2020.
The Reserve Bank of India was also a big buyer in 2022. Its total gold reserves now stand at 782.7 tonnes, ranking it ninth. gold holding countries in the world. Since resuming buying at the end of 2017, the Reserve Bank of India has purchased over 200 tonnes of gold. In August 2020, it was reported that the RBI planned to significantly increase its gold reserves.
Other big buyers of gold in 2022 are Kazakhstan, Uzbekistan, Qatar and Iraq.
In the East, many people still use gold as their primary form of savings and wealth preservation. An article published by Looking for Alpha sums up this dynamic.
For millions of people in Asia, gold remains the “basic form of savings”. Unlike the West, where financialization began decades ago, and gold was slowly removed from people’s daily lives. Until a financial crisis hit, that is. In the West, people have little or no physical gold when they feel financially secure. The people of the East have maintained a long-term view regarding gold. Their ancestors were saved in gold, and so they were educated. Knowing that in the end, gold does not lose its purchasing power.
For example, Indian households own around 25,000 tonnes of gold and this number may be higher given the country’s large black market. gold is not just a luxury in india. Even the poor are buying gold in the Asian nation. According to an ICE 360 survey in 2018, one in two households in India have purchased gold in the past five years. Overall, 87% of households in the country own some amount of yellow metal.
So while western investors dump gold as the price drops, eastern investors take advantage of relatively low prices (even though gold is more expensive in many fiat currencies other than dollar) and gobble up gold as inflation eats away at the value of their local currencies.
By Zerohedge.com
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