Who Drives the Bus? UK Gold Import 996t in 2019

Who Drives the Bus? UK Gold Import 996t in 2019 by Jan Nieuwenhuijs for Voima Gold

The UK net imported 996 tonnes in 2019, according to data published by Eurostat.

Contrary to what investors often assume, the price of gold is not determined by consumer demand such as jewelry or coins. What drives the gold price is institutional (supply and) demand. Because the most liquid gold spot market is in London, this is where the price is set.

In 2019, the UK net imported 996 tonnes, which was in line with the direction of the gold price. As usual. Over 2019 the US dollar gold price was up 18.9%.

UK Annual Net Gold Flow vs Gold Price

Green bars mean a positive correlation between the UK’s net flow and the direction of the gold price.

In November and December, the UK only net imported 83 and 10 tonnes respectively. The majority of the UK’s inflow for 2019 was imported in the months when the price of gold went up. For July 2019 net imports accounted for 194 tonnes, August 227 tonnes, and September 179 tonnes. When imports came down late 2019, the price of gold plateaued.

UK monthly gold import

The UK’s monthly net flow was positively correlated to the direction of the gold price 66% of the time from February 2005 until December 2019. This highlights the London bullion market’s influence on the gold price.

Gold investors in the East tend to do the opposite from gold investors in the West. When London is buying, demand in the East grinds to a halt. When London ramped up imports in July and August, driving the price up, Chinese imports collapsed as we could see in my previous post. (Read this article if you like to learn more about the dynamics between gold demand in the East versus the West, and the gold price.)

The price of gold increased 4.6% last January, and like “clockwork,” the Indian gold market had its weakest January import in five years, at a mere 31 tonnes.

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