Gold is quietly flowing out of the West and into China and other central banks, a bad sign for the dollar and a bullish one for gold.

• Central banks are selling US government bonds and buying physical gold instead, which now makes up a bigger share of their reserves than US debt.
• China's gold demand hit a record 207 tons, breaking a mark that stood for over a decade.
• Investors are dumping "paper" gold (ETFs and claims) while real bars move east — gold has been a top US export for months.
• The gap between paper gold prices and physical gold prices is a warning that the market isn't as honest or healthy as it looks.

Outlook: Expect the move away from the dollar and toward physical gold to keep building, supporting higher gold prices.