Koos Jansen
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Koos Jansen
Posted on 10 Jun 2014 by

Chinese Gold Demand Stable (823 MT YTD), Shanghai Silver Scarce

Chinese wholesale demand for physical gold, measured by SGE withdrawals, was more or less equal in week 22 (May 26 – 30, 2014) at 35.7 metric tonnes, relative to 36.4 tonnes in week 21. The year to date weekly average is 37.4 tonnes, which is 1908 tonnes annualized.

Shanghai Gold Exchange withdrawals only 2014 week 22

Silver remains scarce in Shanghai, premiums for spot silver past week have been above 6 percent over the international price and some contracts on the Shanghai Futures Exchange (SHFE) are still trading in backwardation. On June 6, when the SHFE closed, the bid price for the first delivery month silver contract, which expires on June 16, was ¥ 4058 yuan. The ask price for the December contract was ¥ 4053 yuan. This means that when you own physical silver, or can get your hands on any, you can sell it in June and at the same time buy it back in December for less money. Silver delivered in June trades over a premium to silver delivered in December, which emphasizes spot demand. Normally precious metals trade in contango; future prices being higher than spot.

SHFE silver backwardation june 6, 2014
The open interest on the SHFE is calculated bilaterally. One contract resembles 15 Kg silver, fineness no less than 99.99%.

The profit opportunity has attracted supply because the backwardation between the first delivery month and future contracts has decreased since a few weeks.

In previous posts I’ve reported the SGE silver premium based on the weekly Chinese SGE reports that always lag one week. Additionally, these reports quote silver premiums by the SGE’s most liquid silver contract Ag(T+D), though this contract is not fully deliverable. That’s why I manually calculated the premium of the spot silver contract Ag99.99 and the spot-deferred contract Ag(T+D) on the SGE over the international price this past week (June 3 – 6, 2014). There was quite a difference in the premiums.

Silver premiums Shanghai week 22, 2014

Spot 9999 silver on the Shanghai White Platinum & Silver Exchange closed at 6.6 % on June 6.

This table is a trading overview from the SGE of June 6:

SGE trading June 6, 2014

Let’s examine the data highlighted in red to get a better understanding about trading on the SGE. The spot-deferred contracts (T+D) can be delivered every business day if both longs and shorts agree on delivery. Intensions must be submitted between 15:00-15:30 (GMT+8). If the amount of longs that want to take delivery transcends the amount of shorts that want to make delivery, the “deferred compensation fee” payment direction is short to long. I believe at this moment the daily compensation fee rate for Ag(T+D) is 1.5/10000 (times the silver price times the amount of Kg’s in the contracts), but the SGE often adjusts the rates. The settlement price of (T+D) contracts is disclosed as the “weighted average price”. On June 6, some Ag(T+D) longs apparently wanted to take delivery, perhaps to sell the silver bars instantly as Ag99.99 to pocket a profit, but the Ag(T+D) shorts refused to deliver any; the “delivery volume” was zero and the payment direction was short to long. By the payment direction we can tell some longs submitted for delivery.

Overview Shanghai Gold Exchange data 2014 week 22

– 35. metric tonnes withdrawn in week 22 (26-5-2014/30-5-2014)

– w/w – 1.88 %

– 823 metric tonnes withdrawn year to date.

My research indicates that SGE withdrawals equal Chinese wholesale gold demand. For more information read this.

Shanghai Gold Exchange withdrawals 2014 week 22

This is a screen shot from the weekly Chinese SGE trade report; the second number from the left (blue – 本周交割量) is weekly gold withdrawn from the vaults in Kg, the second number from the right (green – 计交割量) is the total YTD.

Schermafbeelding 2014-06-06 om 11.18.39

This chart shows SGE gold premiums based on data from the SGE weekly reports (it’s the difference between the SGE gold price in yuan and the international gold price in yuan).

SGE premiums

Koos Jansen
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  • Zhang An Ping

    Silver is no longer in backwardation (constrained availability / positive cobasis) on COMEX and the charts would appear to indicate that any technical buying above 18.75 has been purely speculative – hence the apparent inability to move higher http://monetary-metals.com/wp-content/uploads/2014/06/letter-jun-8-silver.png http://monetary-metals.com/monetary-metals-supply-and-demand-report-8-june-2014/

    Any update on Raymond “infinite-rehypothecation-is-this-week’s-fad” Leung Hai – Know – Because – I – Read -it- on – Zerohedge Ming?

    • In Gold We Trust

      Nope, gonna call tomorrow morning. Btw, what does your avatar picture say?

  • In Gold We Trust

    Just saw this chart on silver premiums on the MCX (indian futures exchange). There are no import tariffs on silver in India that I know of.

    • Battle Beagle

      Wow, ~12% silver premiums for a major exchange and not some small town coin shop?! Looking at the chart, premiums never got that high even during the run-up in silver from 2010-2011.

      I’m not a very bright guy, but it appears the market for silver is starting to see some serious and undeniable bifurcation between eastern and western exchanges.

    • Patty

      Does that mean for 6 months now buying silver in NY and selling it at once in Mumbai is providing a 10-12% gain? Where are the “speculators”?

      • In Gold We Trust

        If the chart is correct, I guess it does…

  • Lorin

    I am travelling to China in August. Was considering taking a few silver rounds to exchange for Yaun. Thoughts?

    • Zhang An Ping

      €uro and £ ** are probably more widely accepted in e.g. hotels and major shopping centres, though if your Mnadarin is up to it you could perhaps try haggling with a local coin dealer (assuming he knew what Yaun was in the first place)

      In all seriousness, compare the cost of converting e.g. €1000 into RMB to that of buying and then selling an equivalent amount of Silver and I think you will find the paper stuff not only cheaper and far more widely accepted, but far more readily divisible and portable. As an example, that €1,000 would weigh a few grammes as banknotes but around 2.2 kg in shiny form. It also has to be said that, due no doubt to their immense value, TF Metal “rounds” are not widely circulated outside of the major metropolitan areas, and if you are intent on going physical, then Chinese Pandas *** would be the tool of preference; you can buy them in China simply by converting your paper € into Yaun and then approaching any high street bank or coin dealer, who will then be more than happy to convert them back into Yaun as soon as you need local spending money

      ** please note that the US$ is not suitable as a medium of exchange or a store of value, as you will by now surely know from KWN, not only is it not real “money”, but it’s apparently going to collapse any moment and be replaced by the Yaun. (Yawn)

      *** the “metal” , not “fur & meat” variety (just to spell that out in black & white)

    • The_Spanish_Inquisition

      A very shrewd idea, and you have every reason to be concerned! Although the Cartel banksters would have you believe that China is the World’s second largest economy http://www.hsbc.com.tr/tr/kurumsal_isletme/rmb/_pdf/RMB_Panel_Presentation_03052012.pdf (and that the Yaun is a major currency http://www.swift.com/assets/swift_com/images/products_services/RMB_graph_august2.jpg ) these are just basically lies spread by TPTB, because as we all know, Chinese data are made-up and the entire infinitely leveraged shadow fiat paper ponzi scheme is just a sham, because China is basically a bubble full of empty warehouses, ghost cities and highways to nowhere

      In fact – as you will discover first-hand when you visit the Communist Dictatorship in August – China is basically just a massive slave labor camp run by corrupt officials who are primarily interested in polluting the environment, bullying neighbor states and oppressing innocent Tibetans. For them the Yaun may be useful as a fake currency used to satisfy their chronic addiction to gambling, but at street level, amongst the tightly-packed alleyways of the collectivist hives in which the ordinary (predominantly male) drones are forced to live out their short and brutal existence, transactions for the few meagre items that the civilian population are permitted to buy are typically still conducted on a barter basis.

      For proof of this you need look no further than the barbarous coinage which Chinese peasants are obliged to trade amongst themselves – typically denominated in units or multiples of farmyard animals (such as the Ox or the Horse, or in some years when the 5 Year Plan has failed to produce a record rice harvest, even Rats and Snakes!) and this is the reason why Agricultural Bank of China is the largest bank in the world (due to the fact that every branch needs to have a co-located barn and in some cases a primitive abbatoir)

      Here are some examples of coins denominated in Pigs (and please also note that “9” sounds almost exactly the same as “Pig” in Mandarin and “Cow” when spoken in Cantonese) http://www.pandausa.com/image/lunar/china/1ozsilver/2007Chinese1ozsilverpigcoinfront.jpg

      http://Www.sgcoins.com/image/cache/data/pic/2012/0323/20120323035827785-500×500.jpg

      As you can see, 1 Pig = 10 Yaun, whilst a full litter of piglets adds up to a round 100 Yaun (which is just slightly more than the lifetime earnings of an average graduate from one of China’s top Universities) Here is one convertible into Goats: http://www.chinesecoins.com/shop/2003-1-oz-silver-goat-scallop-proof-coin and here is a Chicken http://www.pandausa.com/image/lunar/china/1ozsilver/20051ozsilverroosterback.jpg

      In these curcumstances your Silver rounds are likely to be snapped up in an instant by the greedy Chinese, who admire and covet all things American with barely-concealed yearning; just as the Germans named one of their northern port cities after the Big Mac and France named its language after our fried potatoes, so the Chinese have now egregiously copied the Stars motif from the American flag and are also busily buying up what for them is high-end real estate in Detroit. So, you might not even need a whole Round to finance your visit, maybe just a half-ounce plus a few glass beads to pay off the local Police department. Hershey Bars work great for the kids, and nylon stockings will ensure that the local geishas love you long time

      Please do let us know how you get on (and don’t drink the water or breathe the air – they are all basically Commies and out to contaminate your essential bodily fluids)

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