The following is excerpted from the April 21 issue of Precious Metals Weekly from Metals Focus: 

"The Metals Focus team has just returned from a trip to Belgium. Our meetings and discussions with local players have confirmed that the local gold market has continued to suffer from stricter anti-money laundering measures that have been introduced in recent years.

"It is important to highlight the importance of the Belgian bullion market in Europe. Due to competitive prices being offered by local players, Belgium has for long been an active place of physical gold trading in Europe. This has been particularly the case during 2008-12 when the Belgian gold market witnessed a significant rise in volumes on both sides of the market. On the one hand, a surge in demand for physical gold across Europe in the aftermath of the financial crisis and the sovereign debt problem led to a rise in hand-carried purchases of gold bar and coins by the non-Belgian trade. On the other hand, a sharp rise in jewellery recycling in debt-ridden southern European countries saw an increasing amount of gold being shipped to Belgium for remelting.

"However, the size of the local market has shrunk considerably over the last couple of years, as the regulations on cash transaction payment became tighter .... Since April 2012, traders in Belgium have no longer been allowed to pay or be paid in cash for the trading of precious metals for an amount of €5,000 or more (€3,000 or more from the start of 2014), both in the case of a sale or a purchase of such metals. Prior to that, the upper limit for cash transactions was €15,000.

"It is worth remembering that, while robust demand for physical gold in Europe is largely attributable to a poor macroeconomic backdrop, a distrust of governments and an effort to convert wealth into less visible forms has also played an important part. Illustrative of the latter two factors is the growing preference for smaller bars (as opposed to kilobars) across major markets in Europe in recent years. In many cases, the value of gold purchases tends to be within the maximum cash threshold, as such transactions do not have to be declared.

"As such, it is not surprising to see a sharp decline in gold trading in Belgium since last year, in terms of both demand from local investors and from hand-carried purchases by the non-Belgian trade. For instance, our estimate suggests that physical gold demand last year fell by more than 30% yoy, exceeding the 23% decline seen in the European total.

"Moreover, even though demand in some German-speaking areas seems to have improved earlier this year on the back of renewed Greek debt concerns, gold investment in Belgium has remained lacklustre so far this year. A similar trend was also witnessed in the inflow of old jewellery scrap into Belgium, as feedback from our contacts suggest that volumes have remained on a downward trend this year, despite a rally in the euro gold price in the first quarter. Going forward, should current regulations remain unchanged, our contacts remain rather cautious, as the market may continue to suffer from an ongoing shift to neighbouring countries with a higher cash transaction limit."

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