Physical demand from China remains at unprecedented levels while Indian gold demand has, for the moment, been sidelined by government intervention. As a result, 2014 is shaping up to be an interesting year.

An annual supply deficit of 1,600 tonnes could drain all ETF and central bank holdings in a matter of a few years. But, it is very doubtful that these gold owners would be willing to let their holdings go to zero. Therefore, at some point, the massive dishoarding will cease or slow dramatically and that will be a very bullish moment for gold.

News surfaced this week that not only are record amounts of gold being imported into China via Hong Kong, but also via direct import to Shanghai, and much of it is coming from Switzerland, with some evidence the PBOC is the final destination for a sizeable chunk.

Its long tentacles can reach out in any direction, grasping its prey in an inescapable vice-like grip.

The real mesmerizing component of Hong Kong’s gold import and export figures over the last few months, is NOT how much Hong Kong shipped to Mainland China. It is how much was shipped into Hong Kong by other countries!

Asian demand in general and Indian demand in particular, must not be confused with the superficial understanding of gold and the fickle demand typically displayed by western investors towards the yellow metal.