U.S. gold is being exported to Asia, especially Hong Kong

NEW YORK -- 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 have 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.