Gold export levels from Switzerland have shown some volatility over the last couple of months. In August, the nation increased its exports by 7.3% from the month prior to meet India and China’s high delivery demands.
By September, however, Switzerland’s exports sharply declined by 15% as both India and China’s consumer demand rates fell with the sudden spike in gold pricing, making the commodity more expensive for retail buyers. Viewing Switzerland’s past export data can show some insight into how the upcoming holiday season in India and China may play out regarding gold performance levels.
Switzerland is the largest gold refining and transit hub in the world. The nation refines around 70% of all the gold in the world while exporting around $100 billion worth of gold per year, based on 2022 data.
At the same time, India and China are the world’s biggest gold consumers, as each nation values gold for its cultural significance and ability to store value. With that being said, the local demand rates in both India and China are highly sensitive to seasonal factors, high gold prices, and even weather changes.
During August, Switzerland exported 7.3% more gold to the respective nations compared to the month prior. This increase in deliveries offset its lower export levels to Turkey.
Typically, India and China make most of their gold purchases during the festive season, which runs from October through November in India and then stretches through the Lunar New Year in February in China. Despite these dates, both nations imported more gold from Switzerland in August than they had since May, with shipments in China increasing by 1%.
Spot gold experienced a steady decline in price throughout the month of August, with gold futures starting at $1,978.80 per ounce on August 1, just below key $2,000-per-ounce lines, before tumbling all the way to $1,915.20 per ounce on August 17. Buyers in India and China likely saw this price decrease as an opportunity to hop on the precious metal before another price increase. This buy-in strategy ultimately may have driven the spike in Swiss exports during August.
During September, however, the trend reversed. Switzerland’s gold exports plummeted by 15% compared to the month prior. The low deliveries were primarily driven by decreased exports to both Turkey and India.
So, what changed in India’s buying patterns?
The end of the year typically sparks India’s strongest gold-buying season as consumers prepare for the upcoming festivities. The auspicious wedding dates return in the fourth quarter of the year, and citizens celebrate numerous Hindu holidays like Akshaya Tritiya and Diwali. Such festivities spike precious metals buying as the Hindu culture sees gold as an integral part of numerous ceremonies and a sign of wealth, luck, and gift-giving.
Despite this, India’s gold exports from Switzerland did not increase in September as expected. The first reason for this behavior could be that gold prices were above what buyers were willing to pay. Gold prices increased and remained relatively steady throughout September, above August’s declined levels.
Gold increased in response to numerous geopolitical tensions and other factors, and retail consumers in India were not prepared to pay this price. At the same time, India’s monsoon season had not yet concluded. India’s monsoon season was expected to conclude by October 15 despite it typically ending in September, so rural farmers had not yet yielded profits from their crops.
India’s rural population accounts for around 60% of the nation’s gold purchases. Since the monsoon season ran a bit late this year, the gold-buying trends are running late as well. The World Gold Council expects India’s gold demand to pick back up as we enter the fourth quarter and the rural population begins buying gold again ahead of the festive season.
“The economic environment remains supportive, with most macro indicators pointing towards continued momentum in economic growth. And a good 2023 monsoon bodes well for farm incomes in Q4,” the World Gold Council explained in a recent report.
While India and Turkey may have imported far less gold from Switzerland during September, Switzerland continued its deliveries to China during the month. In September, Switzerland exported $2.6 billion worth of gold to China, helping the nation fulfill its raging demand rates. On September 14, local gold premiums in China soared above $121 per ounce, breaking the previous record set in August.
Moving into the last quarter of the year, analysts expect Switzerland’s exports to return to more normal levels as India’s buying increases. As always, investors should consult their advisors before making any portfolio decisions.