Koos Jansen
BullionStar Blogs
Koos Jansen
Posted on 16 Jan 2015 by

China Continues To Drain Global Gold Inventory

Withdrawals from the Shanghai Gold Exchange (SGE), the best indicator for Chinese wholesale demand, have been strong in 2014. In total 2,102 tonnes was loaded out from the SGE vaults. Mid 2014 withdrawals were relatively low, then they ramped up in September.

In this post we’ll examine where this gold was sourced from.

Shanghai Gold Exchange SGE withdrawals delivery monthly 2009 - 2014

At this moment we don’t know exactly what the composition was of the supply side of SGE withdrawals in 2014 – scrap, mine or import, though SGE chairman Xu Luode gave us a hint at the ninth China Gold & Precious Metals Summit that took place in early December:

As regards the concerns over the Chinese gold demand, chairman of the Shanghai Gold Exchange Xu Luode told the conference that the gold market in 2014 is still a CHINA YEAR. …China has imported over 1,100 tonnes of gold by November this year and the whole year’s bullion import is estimated to reach 1,200 – 1,300 tonnes, a number only next to the year of 2013.

As I have demonstrated before the main feeder for China’s gold hunger is the London Bullion Market (the UK), though in 2013 this was more so than in 2014. Let’s go through the most recent customs data published by the largest suppliers to China mainland: the UK, Switzerland, Hong Kong, Australia and the US.

The UK

The great gold exodus from West to East started early 2013; 12.5 Kg London Good Delivery bars (995 purity) from the UK are shipped to Switzerland, where it’s refined into 1 Kg (9999 purity) bars and send forward to the East. The big change since 2014 is that more gold is being send directly to China instead of going via Switzerland and Hong Kong, partially because China has increased its refining capacity.

In total the UK net exported 173 tonnes in November, up 282 % m/m; the biggest outflow since July 2013. Net export to Switzerland also saw a huge spike in November, 118 tonnes, up 179 % m/m, the largest tonnage in 9 months.

In the next chart I have added SGE withdrawals to UK gold trade – since January 2013 we can see a correlation between net export from London and withdrawals in China.

UK Gold Trade 2012 - November 2014

January – November total UK net gold export stands at 447 tonnes, net gold export over this period to Switzerland was for 579 tonnes.

In November UK gold export to China was 30 tonnes, up 186 % m/m, an all time record. Aggregated net gold export (January – November) heading for the mainland was 105 tonnes.

UK - China Gold Trade 2012 - November 2014

For all UK trade data I have used the tonnage disclosed by Eurostat.


The Swiss imported 1,597 fine tonnes in the first eleven months of 2014; export was 1,616 tonnes over this period.

Switzerland gold trade 2011 2014 November

I would like to emphasize fine tonnes in the chart above. Thanks to a commenter on this blog (named sb) I have calculated the fine content of Swiss gold trade. One of Switzerland’s core businesses is refining gold; this means the import tonnage disclosed by Swiss customs is of a significant lower purity than the exported tonnage. A good example is 2014:

Switzerland gold trade November 2014

First the data: in November import was 219 tonnes, up 137 % m/m, a record for 2014; export was 232 tonnes, up 20 % m/m, a record for 2014 as well. Net outflow was 12.5 tonnes.

We can see the more Switzerland is importing the higher the purity of the imported gold. Here is why; there is a certain amount global mines can produce as doré every month (low purity), when demand exceeds this amount the Swiss need to import bullion bars, which makes the overall purity of import rise. The last chart clearly illustrates that the more gold is passing through, the more is drained from global bullion bar inventory.

The top destinations of Swiss gold are India, Hong Kong, Singapore and China mainland.

Switzerland gold trade largest traders Jan Nov 2014

Export to China matches, again, the trend of SGE withdrawals; relative weakness from May until August, strength from September till present.

Switzerland China gold trade November 2014

In November Swiss gold export to China was 35 tonnes, down 18 % m/m. Switzerland net gold export January – November heading for China was 187 tonnes.

Hong Kong

Hong Kong is Asia’s main trading hub. Gigantic amounts of gold are imported, most of which is destined for the mainland, though Hong Kong has also net imported hundreds of tonnes itself since 2013.

Hong Kong gold trade November 2014

I’ve been excepting most of Hong Kong’s stock will ultimately be drained by China. From Koos Jansen, June 21, 2014:

In 2013, the year Chinese demand for physical gold exploded, Hong Kong gross gold import was 2239 metric tonnes. The bulk of this was exported to China mainland (net 1158 tonnes), but a staggering 597 tonnes was left behind.

… It will be interesting when Hong Kong becomes a net exporter.

Not by staggering amounts, but Hong Kong is currently a net exporter for four months in a row.

Hong Kong monthly gold trade January 2013 - November 2014

Hong Kong started net exporting in August when demand in China was relatively weak; I expect these net exports to further increase, as Chinese demand accelerated in September through December.

In the first eleven months of 2014 Hong Kong net exported 742 tonnes to mainland China – down 30 % y/y.

Hong Kong - China gold trade 11-2014

In November net export to China was 99 tonnes, up 28 % m/m, a record since February. Note, again, the SGE withdrawal pattern in exports.

Hong Kong - China gold trade monthly January 2009 - November 2014


Australia is the second largest miner in the world, producing roughly 250 tonnes a year. Gold that is nearly all exported, as the ozzies themselves do not have an appetite for yellow metal comparable to Indians or Chinese.

Export data of the land of down under can be tracked through COMTRADE – that copies its data from the Australian Bureau Of Statistics. This data is deceiving though, as I’ve just found out. Australia discloses gold export to China, also when it’s shipped via Hong Kong. This results in double counting, as Hong Kong counts this gold as exported to China as well.

When I compared Australia’s export to China data from COMTRADE with Hong Kong’s import from Australia data from the Hong Kong Census And Statistics Department, I noticed they are nearly the same. This is an accounting inaccuracy by the Australian Bureau Of Statistics in my opinion.

Australia COMTRADE vs HK census

To make sure the COMTRADE numbers are reliable I double-checked them with numbers from GTIS – that copies its data from the Australian Bureau Of Statistics as well.

Australia Gold Trade Data Comparison png

These data sets are the same – the differences are negligible.

I asked Bron Suchecki, manager at the Perth Mint in Australia, if he knew whether his company sends gold destined for China always via Hong Kong or not. He replied (published with permission):

Generally, little of what gets shipped from the Perth Mint to Hong Kong would stay there – most would be in transit to China. There are many reasons for why Chinese bound metal would transit through Hong Kong, including logistics (more flights Perth to Hong Kong than Perth to China) and the breaking up of the usual one tonne plus sized deals we do with bullion banks into smaller shipments for their end customers.

In another email he explained the Perth Mint mostly sells to Bullion Banks, who are subsequently the legal exporters from Australia to China or Hong Kong. There for he doesn’t know how gold destined for China is shipped.

This comment Bron posted at his own blog, he stated about Perth Mint shipments to China in 2013… 

The Perth Mint probably accounted for 15% of that 1500t China import. 

The 15 % (225 tonnes) doesn’t reflect a precise tonnage, however I think it shows Australia exports more gold to China than is disclosed by COMTRADE/GTIS (180 tonnes).

Conclusion: the numbers I used in this post for gold export from Australia to China have been double counted (I’ll put a link in to this post for clarity). Although we know Australia exports huge quantities to China, we don’t know how much is shipped in addition to what travels via Hong Kong. I don’t feel comfortable, therefor, using any of Australia’s export numbers at this stage.

The US        

Right, so what’s the score? We are chasing 1,100 tonnes, thus far we’ve got 105 tonnes from the UK, 187 tonnes from Switzerland and 752 tonnes from Hong Kong, all added up makes 1,044 tonnes. Where could the remaining 56 tonnes could have come from? Not from the US, according to data from USGS.

The US exports substantial amounts of gold to Switzerland and Hong Kong, but very little to China itself. Worth mentioning, however, is that in September the US for the first time exported a few tonnes of bullion directly to China.

US - China gold trade
Is the US going to send larger amounts of bullion in the future directly to China?

Needless to say the 6 fine tonnes that were exported from the US do not fill the 56 tonnes gap. Were the remaining 50 tonnes came from I don’t know. It can be from mines in Africa or central Asia.

Koos Jansen
E-mail Koos Jansen on:

  • rowingboat

    56 tonnes is close enough in my book, within bounds of error, but have you checked South African exports to China? I haven’t yet but it’s worth checking their trade data. The Rand Refinery, according to one report I’ve read, processes up to 80% of continent Africa’s gold production so a lot of gold flows through the country… good chance SA exports directly to China now as well.

    • KoosJansen

      I haven’t. I should. Btw, where is the rest of the world getting its gold from?

      • rowingboat

        I think I’ve estimated that one before. From the Q2 2014 data, world consumer demand according to WGC was 1500mt annualised EXCLUDING India + China demand. We know India + China import 2000mt, global mine production ex China is 2500mt, so the West needs to export around 1000mt on an annual basis moving forward. But when you take into account that ex Soviet central banks are buying their local production, then the West needs to export more than that because some of that 2500mt gold production is unavailable. I think all of this is transparent in the trade data, e.g. how Swiss and UK supplies are being squeezed.

    • Guest


      Can I purchase gold directly from a gold mine?
      No – gold mines do not sell finished product. The gold needs to be refined before sale, and in South Africa, this is done by Rand Refinery. Rand Refinery then markets and sells the gold to the London Bullion Market Association in London which in turn has members who sell physical gold to the public.

      For ease of reference, we have listed the details of the three parties that you should approach for purchasing gold.
      Rand Refinery, South Africa (see the questions above on purchasing gold)
      London Bullion Market Association – http://www.lbma.org.uk
      LBMA members – http://www.lbma.org.uk/members

  • carpenterfisherman

    I have an idea where the 56 tonnes came from

    CHAIRMAN GREENSPAN. “The Federal Reserve Bank’s basement is a foreign country. When they move it out of the basement into the United States, it’s an import. Then, when they ship it out again, it’s an export.”

    From FOMC minutes

  • Matthew

    Yes, you can’t add Australian exports to HK imports because of double counting. Swiss look OK. Not sure about UK. South Africa doesn’t report any exports to China. FWIW my estimates of China net imports Jan-Nov from an entirely different source was 1,201 so looks like I was a little high. Though that speech hasn’t got any sources for the 1,100 figure, unfortunately.

    • KoosJansen

      He said it was more than 1,100 tonnes, probably within 1,100 – 1,150 range. Given hi SGE withdrawals I also expected more import. But it makes sense if we take into account the long gold discount periods in 2014 (= elevated scrap supply).

  • Matthew

    Would you say given SGE withdrawals only slightly down but imports substantially down, even allowing for mine production they are getting to be a less useful guide to China’s call on the global gold stock?

    • KoosJansen

      For 2014, yes; import was down. Who knows what happens in the future. The Chinese seem to have invested a lot on the bottom. It’s hard to predict what they will do when prices rise.

      • Matthew

        That isn’t what I’m getting at. It’s whether SGE withdrawals have become a misleading indicator of the ‘drain on global inventory’.

        • KoosJansen

          They are still a good “indicator”, but we have to aware of the composition changes.

  • rowingboat

    You can have a field day with this one, Koos:
    When this data is publicly available (Feb 5), bloomberb will have moved on to a new headline. However, I’m positive they’re subtracting non-gold coin exports (China to HK), which shouldn’t be included in their calculation. I.e. net imports from HK were actually over 800mt in 2014, not 750mt as reported (plus >300mt from UK, Switzerland direct to mainland).

  • Graham McCartney

    Never mind where the other 50 tonnes of gold came from….doesn’t anyone realize that the Chinese are buying relatively small amounts of physical gold compared to whats stored in vaults around the world but selling enormous amounts of paper gold to keep the price down. Effectively they are probably now controlling global physical gold trade through the Shanghai and HK gold exchanges using the derivatives invented in the west to effectively destroy the US dollar…….eventually!!! This is Japan and the copper market all over again….does anybody even know how much paper gold is traded compared to physical deliveries….the factor is about 100x for copper.

Copyright Information: BullionStar permits you to copy and publicize blog posts or quotes and charts from blog posts provided that a link to the blog post's URL or to https://www.bullionstar.com is included in your introduction of the blog post together with the name BullionStar. The link must be target="_blank" without rel="nofollow". All other rights are reserved. BullionStar reserves the right to withdraw the permission to copy content for any or all websites at any time.