U.S. gold bars and coins find new home overseas on Asian demand

Mon Feb 11, 2013 5:07pm EST

* U.S. private gold export in Dec highest since Sept 2011
    * Growing gold vault, precious metals ETFs stir demand
    * Half of December gold export went to Hong Kong

    By Frank Tang
    NEW YORK, Feb 11 (Reuters) - Booming demand for gold as a
store of wealth among Asian investors is driving physical gold
bars and coins out of the United States and into Asia.
    A growing number of gold vaults for affluent Asians and new
precious metals investment products, particularly
exchange-traded funds, have led to an exodus of gold owned
privately from the United States into emerging economic powers
such as China.    
    On Friday, Commerce Department data showed U.S. exports of
nonmonetary gold, which excludes central bank transactions,
soared by 43 percent to $4 billion in December from the previous
month. 
    That's the highest total and the biggest month-on-month jump
in U.S. private gold exports since September 2011, when gold
rallied to a record high over $1,920 an ounce. Prices are
currently about 14 percent below the peak at $1,643 per ounce.
    Hong Kong accounted for around $2 billion, or half of the
nonmonetary gold exports for the month.
 
 
    Uncertainty about the U.S. fiscal situation and euro zone
debt crisis have prompted many ultra-rich gold investors to move
their bullion holdings to Hong Kong and Singapore from
traditional gold hubs in Switzerland, London and New York.
    "As the Asian market becomes more affluent, we are seeing
more private investors looking to move their metals offshore,"
said Miguel Perez-Santalla, vice president of online
precious-metals exchange BullionVault. "People want to have
their money next to them."
    A shortage of storage space has been a growing issue in Asia
as vaulting companies have not kept up with the pace of inflow
of physical bullion, he said.
    U.S. gold exports to Hong Kong has been steadily increasing
in the past several years as wealthy Asian individuals looked to
diversify their portfolios into gold, said Michael George, a
commodity specialist at the U.S. Geological Survey.
    In November, ETF Securities launched three ETFs that are
backed by physical precious metal in Hong Kong. 
    Some money managers cited the recent U.S. fiscal crisis for
the physical gold outflow.
    "The uncertainty over the debt ceiling and fiscal cliff have
greatly diminished confidence in the U.S. banking system," said
Jeffrey Sica, chief investment officer of SICA Wealth, which
manages over $1 billion in client assets.
    George said some of the gold import to Hong Kong could be
transferred to China and nearby countries such as Taiwan, which
has also seen an increase in U.S. gold imports in recent years.
    Last Tuesday, data showed Hong Kong's net gold flow to
mainland China jumped 47 percent in 2012 to a record high of
557.478 tonnes, a sign of strong Chinese demand. 
    China, the world's second largest economy, has been vying
with India to be the world's top gold consumer. 
    Gold demand from China is likely to grow around 10 percent
in 2013, an official from the trade group World Gold Council
said in a recent interview. 
    Hong Kong's proximity to the prosperous southern China and
free capital-flow environment have benefited the former British
colony as China's trading window to the world.
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