Koos Jansen
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Koos Jansen
Posted on 15 May 2014 by

Are The London Gold Vaults Running Empty?

As I have extensively covered in the past months the majority of the unprecedented demand for gold from China, which started in January 2013, was being supplied by the UK, home of the London bullion market and many bullion bank (and private) gold vaults. Via Switzerland, where the gold was remelted into kilobars, it was shipped towards Hong Kong where most of it was re-exported to China mainland. Whilst in 2013 it was clear that the world’s largest gold-backed ETF, GLD, was the predominant supplier from the UK, since January 2014 GLD inventory has more or less stabilized.

GLD gold inventory

But UK gold export at the time remained elevated. In January 2014 the UK net exported 143 metric tonnes of gold (118 tonnes net to Switzerland), in February net export accounted for 107 tonnes (119 net to Switzerland). This gold must have been fully supplied from other vaults than GLD’s, which raises the question; how much floating supply is there left in London. I believe there is still a lot of physical gold in London (I will do a future post on some estimates), but I don’t know how much of this is floating supply.

Let’s head over to the east and see how much physical gold China has imported year to date, based on official trading statistics. If we look at the trade stats from Hong Kong we can see net export to the mainland in January was 89.7 tonnes, in February it was 112.3 tonnes and in March 85.1 tonnes. The amount that crossed the border in March was down 24 % from February, but still strong – 85.1 tonnes annualized is 1021.2 tonnes. The total in Q1 accounted for 287 tonnes, annualized 1148 tonnes (just to give you an idea).

Hong Kong - China gold trade monthly 3-2014

As we all know by now Hong Kong is not the only port through which China is importing gold. Though the Chinese are reluctant to disclose their gold trade numbers – guess why that is – from the trade statistics of other countries we can see a portion of how much gold officially vanishes in the black hole (China’s strong hands) not to return in the foreseeable future. Switzerland, where 70 % of the world’s gold refining capacity is located among four refineries, has been so kind to publish monthly reports on whom they trade gold with, and how much, since January 2014. The Swiss net exported 12 tonnes to China in January, 36.9 tonnes in February and 26 tonnes in March. If we add up Hong Kong and Switzerland net export to China in Q1 the outcome is 362 tonnes, annualized 1448 tonnes (just to give you an idea). Remember, this is only from two countries, it doesn’t include the kilobar shippings from the Perth Mint to China for example. Chinese gold import in Q1 has definitely been more than 362 tonnes – also because the official trade numbers I’ve used for this post do not include monetary gold, PBOC purchases will not show up in these stats.

It’s remarkable that Chinese net import in March, at least 111.1 tonnes (85.1 + 26), hasn’t been sourced from London, as it has been in the past year. UK total net gold export in March collapsed 85 % m/m from 107 tonnes in February to 16 tonnes in March, net export to Switzerland fell by 72 % from 119 in February to 34 tonnes inMarch. 

UK Gold Trade 2009 - march 2014

The main gold vein, as I’ve called it, that ran from the UK, through Switzerland, through Hong Kong finally reaching the mainland, is drying up. Switzerland net gold export to Hong Kong fell 76 % from 97.9 tonnes in February to 23.9 tonnes in March, according to Swiss customs.

Switzerland gold trade March 2014

In the coming months I’ll be watching very closely if any more gold will be squeezed out of London and how Swiss exports to Hong Kong and the mainland will evolve. I believe the largest floating supply is/was in London, it will be decisive for the gold market if these stocks are gone. Additionally I will search more customs databases to get hard numbers on gold export to China mainland.

The following video was broadcasted in December 2013. Kenneth Hoffman states that the London gold vaults were virtually empty at the time. Are the last bars being moved out at this very moment? The managing director of Switzerland’s biggest gold refinery stated this is exactly what is happening.

Because net export from Hong Kong to the mainland in March didn’t collapse, but Swiss export to Hong Kong did, two things could have happened. Or Hong Kong, which has net imported 924.6 tonnes of gold since 2010, shared a little of its yellow metal to supply the mainland, or other countries than Switzerland increased their export to Hong Kong. To find out I made a chart combining Hong Kong net import with Hong Kong’s main trading partners.

Hong Kong gold trade monthly, March 2014

From looking at the chart I think this is what happened; during Q1 Hong Kong net import dropped (Switzerland and UK imports down, Australia and the US quite stable in March), which means a bigger share of what they imported was sent forward to the mainland supplemented by inventory build up in Hong Kong over the past years.

From stats of the Shanghai Gold Exchange I know Chinese wholesale demand came down after Q1 without premiums going up. This suggest there hasn’t been a supply shortage in the mainland in April. However, even China’s non-government demand pace in April combined with demand from the PBOC, India, Russia and the rest of the world can transcend global mining and scrap supply, pressuring the floating supply. Let alone if Chinese demand will spring back, which is quite likely to happen at these prices and given the fact the Chinese government is officially stimulating its people to buy gold.

Additional charts: Hong Kong net import in Q1 accounted for 193 metric tonnes.

Hong Kong gold trade 3-2014

Chinese net import from Hong Kong in Q1 accounted for 287 metric tonnes.

Hong Kong - China gold trade 3-2014


Koos Jansen
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  • Chris

    Koos – great info.
    Yesterday the World Silver Survey came out…very interesting
    Global silver supply fell from 1,005 m/oz to 978 m/oz (big drop in scrap, flat mining) while physical demand increased from 954 m/oz to 1,081 m/oz (huge increase in phy investor demand).
    Are you seeing anything similar in the gold supply / demand #’s?

    • In Gold We Trust

      Floating gold supply is under pressure.
      I have a guest post coming up on silver supply. Guest writer will raise questions about silver supply. Its a lot less according to him..

  • Rick Enrole

    Are The London Gold Vaults Running Empty?

    Yes – Andrew Maguire said so, and he is “out of London”, so it must be true; over there you can just walk up to a vault, demand to look inside and they have to let you – that’s the Law. No Gold – all gone, apparently, because you can’t see it – if it was there, it would surely be on public display, littering the streets and filling shop windows, but it isn’t, because the Chinese have ‘taken’ it

    In other news a massive tsunami is about to strike the Eastern seaboard of the USA, Yellowstone is about to blow and The Cartel have been ‘capping’ Gold below $1300 again, so Keep Stackin’ !

    • Rando

      Yellowstone alone would put us back a few centuries.
      Is the tsunami you mention the one that would originate out of the Canary Islands? I heard years ago that that particular wave would be over a kilometer high by the time it got here.
      We do live in some interesting times. And it should be noted that the NYSE is, through a buy-out, now based in Atlanta (a reasonable candidate as the new capital).
      I encourage my family and friends to protect their wealth with a percentage in gold, but with ‘full disclosure’ warn that this same gold only has value in a functioning society.

      • Lester

        @Rando! Quite contrarily, gold comes into its own when the official system is out of order. IF there is anything to be traded, one can purchase it with pieces of gold as it was done after the war.

        • Rando

          I agree, Lester, but only when there’s not been a total break-down.
          In a worst case scenario… say where the power grid is down for an extended period, or anything that would affect the chain of supply… a can of pork & beans would have more ‘value’ than a gram of gold.
          And this from someone who encourages preservng wealth with bars, coins, and jewelry.
          Along with cash, food, and a large print bible :)

  • KP

    I recently saw a plausible scenario on the web while surfing – It’s not my idea but I neglected to note the author- it is this – China will offer US treasuries/dollars in exchange for physical gold at the rate of $4000 an ounce. Now that is 3 times the current alleged value.
    I don’t know the macroeconomics of this and whether $4k is too high and physical gold can be levered at a lower price. Also the logistics of ensuring no tungsten adulterated bars are involved. Could the new physical gold dealers in Singapore etc start to make the market with a move like this?
    Could increasingly perceived dollar dangers be exploited in this way? If a new price was established through this forced mechanism does the East have enough gold which would increase dramatically in value while this “loss leading” mechanism hovered up the remaining gold?

  • cartier112

    The video on gold is good, I have a question on the video. They are saying Chinas’ lust for gold is on the wane, do you suppose that gold’s availability to China has already reached that stop? The article (or supposed article) that states China will pay $4,000 for gold could be true, however, what could also be true is the fact that the price of gold is going to $4,000.00 and the Chinese are not the cause but the recipients of this mad dash by other nations to have sold their gold at below $1,200.00 an ounce.

    This is crazy what we have been watching the video puts a little laugh on the POG dropping (laugh, laugh) is this foolish thought that the price is going to drop because there is no longer demand out of China when perhaps their is another case in play, just perhaps there is no large amount of gold left to buy — think, maybe China is not importing as much because there is not the supply to import, do you suppose”

    • lorkoos

      China gets a lot of gold from its own mines, which is not reported.

      In addition, I believe that the western powers are allowing China to amass gold at low prices as way to level the playing field, to avoid future conflicts when the dollar hits the toilet. If/when the dollar collapses, countries who do not have enough gold will be up against the wall. I think when China has enough, prices will skyrocket, but who knows when that will be.

  • Jeff

    Those who are in control and influence and hold gold at the magic number around ($1300), need to be held accountable, liable for the loss of value to all those who invest in gold. I can only imagine the amount would run into the possible 100 of billions, maybe trillions, consider it effects the whole planet. And yes sue too the institution of which they represent. If this law suit were to really happen it would return the stolen wealth back to the people and out of the hands of the few rich.

    • DameEdnasPossum

      Jeff – all rhetorical questions to prove a point i hope? The answers are readily apparent…follow their deeds, not their words.

      The only chance of the current situation changing is via revolution. Don’t expect them to give up their domination voluntarily.

      And rather than get upset about the suppressed price, view it as a ‘glass half full’ and keep stacking at the discounted prices. The manipulation is slowly collapsing and will no doubt accellerate once TPTB are the majority holders of what was formerly central bank (the peoples’) gold

      • AK

        I don’t think it will take a revolution to change things. Per numerous news sources, Russia, China, Iran and Saudi Arabia are well on their way to “de-dollarize” global trade (see link to an interesting article by Bill Holter from Miles Franklin). I think it is pretty obvious that the days of the dollar as THE primary global currency are numbered and I would think that once there are official announcements by Russia, China and Saudi Arabia that they are moving forward to trade without the dollar, we will see a global sell-off in U.S. treasury holdings. How quickly that will evolve is anyone’s guess but as I see it the dollar is “down for the count”.

        • DameEdnasPossum

          AK. I agree that the USD is toast but this shift is in itself a revolution as the world drops the global reserve currency…and the big problem for us all is how the enormous US military capacity will be used (is being used) to defend the USD.

          We ain’t seen nothing yet.

          Q: How many military bases does the US have across the globe again?
          A: Something like 1,000 at last count.

          • AK

            No doubt, anybody who has dared to threaten the almighty dollar has been destroyed by the US military might. The question is will the US and or China/Russia be willing to risk an all out thermo-nuclear war to fight over the privilege of a global reserve currency? My guess is that Russia and China will back down if this were to escalate because they know that time is on their side and all they have to do is sit back and wait for the US to self-destruct. Either way the days of the US dollar are numbered.

    • wasabibites

      Banks are pulling Eric Holder by the nose.They literally can commit any crime for a fine and a kickback.Notice Holder says he will start prosecuting banks,then talk all drops into nothing but lip service and air like the US dollar-Think bankers have their own mafioso-Corrizine son “suicided”as was another bankers son found hung.

  • CPE
  • HUM

    In line with your results would be the ongoing negative GOFO-rate.

  • vizeet

    I think the reason why demand of Gold in China is going down had to do with the Monetary Tightening. Due to monetary tightening there is lesser money available for gambling and so lesser requirement for collaterel. As gold is used as collateral it requirement is going doing.

  • Lester

    Let’s see what might happen when London and NY vaults run empty. We know that metal must be delivered to China at all costs. We also know that Singapore stores some privately held metal. The NSA and the Pentagon also know where the gold is held, and presumably even how much.
    We know that there is a US Navy base in Singapore.
    How long do we think it’s going to take until a US warship gets bombed by “terrorists”? Of course the Navy has to protect itself, and by extension the Great City of Singapore! And by extension the private property of all the gold investors. Naturally that cannot be secure in a terrorist infested city, therefore all the gold will have to be transferred to London or NYC for protective custody, since there is ample vault space available. Iraq’s gold has been very secure for some time now, so is Libya’s. As is the Ukraine’s. I believe there is an airport nearby too. How handy?
    Any bets on the timeline?

  • Margriet Anne O’Regan

    I’m relatively new to this discussion but I’ve been following Karen Hudes who talks of much gold held buried in the Philippines – & some in Hawaii ?? She suggests that altogether there is more than enough around to settle all accounts – even with the consortium of central private banks now trying to control the whole world – & even though they should announce a Jubilee & forgive all debts period & all governments should resume the responsibility of issuing their own currency……..

    I would like to hear another opinion on Karen’s position ~ Thank you.

    I live in Brisbane Queensland Australia & am wondering how things are going to be when we host the Nov G20 summit.

    Cheers, Margriet

    • In Gold We Trust

      I’ve done some studying on what Hudes has claimed. Unfortunately there is very little proof about the alleged 170,000 tonnes in Hawaii. Although I do think there is a lot more physical above ground gold than what the World Gold Council claims, which is (also) 170,000 tonnes.

      The following article, which I don’t agree with fully (!), questions the above ground gold supply http://www.goldstandardinstitute.net/2012/02/19/how-much-gold-stock-is-there-really/

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