When the coronavirus pandemic and related lockdown measures caused the economy to grind to a halt in the second quarter of this year, merchandise imports to Cayman dropped by almost a third.
The decline affected all types of goods, except one: gold.
The importation of non-monetary gold increased by $33.8 million in the quarter ending in June, compared to the same period in 2019.
Last year gold imports were already one of the main drivers of import growth, after a $53 million increase.
According to a leading importer of gold, who spoke to the Cayman Compass under the condition of anonymity for security reasons, there are two reasons behind the trend.
The demand for gold has been extremely high. Over the last 12 months, the price of gold has jumped by about 25%, the price of silver by more than 31%.
The bull market for precious metals started last year and intensified greatly because of COVID-19.
The uncertainty caused by the pandemic prompted a further shift to safe-haven investments like gold and silver.
This is driving up demand in the industry in general and it can be expected that more metal is coming to places like Grand Cayman.
The other reason, is that Cayman has done a good job of positioning itself as a safe place to store assets, whether in a bank account or in the form of a physical commodity. In the space Cayman is in competition with markets like Singapore, London and New York or a traditional hub for precious-metal storage like Switzerland.
Cayman does not charge import or export duties on gold and, unlike in many European markets, there is no sales tax on storage fees. The advantage of offering an offshore location in close proximity to the key North American market is another significant factor.
Most clients of gold importers are investors in the US, Canada or Europe, who store their precious metals in vaults in Cayman. There they get the same advantages they would have in Switzerland, Singapore or New Zealand, but it is much closer to home.
The recent regulatory tightening that has made precious-metals dealers subject to Cayman’s anti-money laundering regulations and supervision has only helped and legitimised the industry.
Gold represents about 80% of precious-metals imports, with the remainder silver. The gold imported to Cayman comes in the form of bars and coins produced by the Royal Canadian Mint, the US Mint, Perth Mint or PAMP Suisse.