Koos Jansen
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Koos Jansen
Posted on 8 Dec 2014 by

China Net Gold Import 1,212t Jan – Nov

Withdrawals from the Shanghai Gold Exchange (SGE) – currently the best indicator of Chinese wholesale demand – keep up a strong pace.

In week 48 (November 24 – 28) SGE withdrawals accounted for 54 tonnes, year to date 1,867 tonnes have been withdrawn.

Shanghai Gold Exchange withdrawals 2014 week 48, dips

Corrected by the trading volume of the SGE contracts that are available for foreign traders (to take delivery, withdrawal from the vaults and export from the Shanghai Free Trade Zone), the weekly withdrawals in the mainland were 46 tonnes at minimum in week 48; year to date the bottom limit is at 1,841 tonnes.

Putting 1,841 tonnes in our basic equation (import = SGE withdrawals – scrap – mine), we can estimate mainland China has net imported 1,212 tonnes of gold up until November 28. Seasonally December and January are the strongest months for Chinese demand; I wouldn’t be surprised if total Chinese net gold import reaches 1,350 tonnes in 2014.

If nothing changes in the way the SGE reports on aggregated withdrawals from vaults in the mainland and vaults in the Shanghai Free Trade Zone – where foreign traders can take delivery, withdrawal and export – 2014 will likely be the last year in which we can accurately grasp the size of Chinese wholesale demand and total net import by using SGE withdrawals as a proxy. At this stage it’s impossible to know how much of the contracts traded by foreigners are physically withdrawn from the vaults in the Shanghai Free Trade Zone and thus distort total withdrawal numbers as disclosed by the SGE. The next screen shot is from the latest weekly SGE report. In green the total withdrawals are highlighted.

Screen Shot 2014-12-07 at 4.33.05 PM
Blue (本周交割量) is weekly gold withdrawn from the vaults in Kg, green (累计交割量) is the total YTD.

Some more details

Bloomberg came out with a story on December 3, titled Shanghai Gold Trade Passes Record as China Seeks More Sway. There is some additional information I would like to share regarding this article. The writer notes:

The volume of all contracts on the Shanghai Gold Exchange, including those in the city’s free-trade zone, was 12,077 metric tons in the 10 months to October, compared with 11,614 tons during all of 2013, according to data on the bourse’s website.

Screen Shot 2014-12-07 at 10.05.18 PM

  • purple = unit, Kg
  • red = total gold volume traded in 2013, counted bilaterally

1) The SGE volumes disclosed by Bloomberg are double counted. This is because volume, open interest, turnover and delivery – not withdrawals – are all published bilaterally by the SGE. Later on in the article, the writer compares these SGE volumes to the data from the London Bullion Market, that publishes numbers unilaterally. From Koos Jansen, August 2, 2014:

The numbers disclosed of the SHFE and SGE are double-counted. Volume and Open Interest on both exchanges are published bilaterally, in contrast to the COMEX that publishes these numbers unilaterally. Meaning: if the volume disclosed by the COMEX is 1,000, than 1,000 contracts changed hands – 1,000 contracts were sold and 1,000 were bought. If the volume disclosed by the SHFE is 1,000, than 500 contracts were sold and 500 were bought.

To compare SGE & SHFE numbers to COMEX one has to divide the Chinese numbers by 2, only then are all the numbers single-sided. 

Perhaps this is valuable information for you when comparing Chinese and Western precious metals markets.

2) The writer notes the total traded volume includes the contracts traded in the Shanghai Free Trade Zone, hinting at the fact those contracts might have caused elevated trading volumes on the SGE. However, the volume traded in the Shanghai Free Trade Zone has been very low year to date. The contracts traded in the mainland are the ones that caused the overall volume to surge.

SGE weekly gold volumes

For a thorough analysis on the SGE and its subsidiary, the Shanghai International Gold Exchange (SGEI), click here.  

What caused the most recent spike (week 47 and week 48) was trading volume of the Au(T+N1) and Au(T+N2) contracts. These contracts hadn’t been traded since October 2013. The volumes of Au(T+N1) and Au(T+N2) are not disclosed on the English SGE website, just like SGE withdrawal and OTC data.

Screen Shot 2014-12-07 at 9.41.20 PM

  • yellow = date (week 48)
  • purple = unit, Kg
  • green = last week
  • blue = this week
  • red = Au(T+N1) and Au(T+N2) volume, counted bilaterally
  • brown = OTC

3) So what? SGE total trading volume is still very little compared to the Shanghai Futures Exchange (SHFE), let alone the COMEX or the London Bullion Market. However, SGE withdrawal data is extremely significant, but these numbers are almost never disclosed by mainstream media outlets, nor by the World Gold Council, Thomson Reuters GFMS or CPM Group. Bloomberg and Reuters only published SGE withdrawals once (correct me if I’m wrong).

COMEX vs SGE vs SHFE Gold Volume

4) From Bloomberg:

Average daily volumes for the SGE’s 99.99 percent purity contract increased to about 20,427 kilograms (656,743 ounces) in October from 11,704 kilograms a year earlier, according to exchange data. By comparison, an average 17.4 million ounces changed hands daily between members of the London Bullion Market Association, according to the group’s data.

The next screen shot shows total trading volume of all SGE contracts in October 2014, we can see the 20,427 Kg number disclosed bilaterally.

Screen Shot 2014-12-08 at 11.48.54 AM

On the website of the LBMA the clearing amount is disclosed unilaterally.

The clearing statistics represent the net volume of loco London gold and silver transfers settled between clearing members of the LBMA. The data is collected and published on a monthly basis and is based on daily averages.

Screen Shot 2014-12-07 at 11.03.18 PM

Note, 17.4 million ounces (541 tonnes) are cleared daily in the London Bullion Market. But, clearing and volume are two different things! Because the London Bullion Market is an OTC market we know very little of what is taking place in this market, however, the latest estimates of 2011 show the daily volume traded in London is 5,000 tonnes – counted unilaterally.

Screen Shot 2014-12-07 at 11.16.16 PM
173,713,000 ounces are about 5,000 tonnes, traded daily.

In short, Bloomberg compared the monthly volume of one SGE contract, 20 tonnes, which is actually 10 tonnes if counted unilaterally, to a daily amount of 541 tonnes, which is actually more likely to be 5,000 tonnes if counted unilaterally.

Koos Jansen
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  • DameEdnasPossum

    That’s a large quantity of gold when considering something like only 2,500 tonnes is extracted from mines per annum…but perhaps this supply is falling along with the price as production costs are tested.

    When considering India’s consumption…and Russia’s…and Thailand’s…and Turkey’s…and Vietnam’s…and everybody else’s…and my consumption ;) then it appears that demand for physical bullion far outweighs supply…and yet the price continues to fall!!!

    This raises several fairly obvious questions:

    1. So…where does the additional supply (above mining production) come from?

    2. What is the limit of that additional supply at current consumption rates (it is not limitless)?

    3. And what happens once we cross the line e.g. similar to Nixon ‘temporarily’ (hah!) suspending the gold standard on 15 August 1971 (collapse of Bretton Woods)?

    4. How long before China and / or Russia play their golded trump card and drop T-bills on the open market? (Perhaps they are waiting for the US to implode all on its own?)

    Logic suggests that we must certainly be fast approaching the end game?

    • Sven

      Re 4) Do China and Russia really want to do that?

      Fast approaching the end game could still be 10 years away given the dynamics and size of markets. Regretfully. Rickards doesn’t think so but everyone and everything is starting to sound like a broken record to me.

      • Cem

        According to Mike Maloney it will happen in this decade. So what if it takes 10 years. We are not HFT we are only trying to secure the future of our families.

      • DameEdnasPossum

        Perhaps. Perhaps not. It is certainly a possibility.

        Who knows? Russia and China (especially) may be forced to play this hand to avert WW3?

        Washington’s ever increasing lack of respect for international law and it’s global neighbours cannot go unchecked forever. With House Resolution 758, the neo-con maniacs have effectively pressed the button on Cold War V.2…and with an overwhelming vote of 411-10. Read the text of the resolution and it is abject war-mongering against Russia…a country with very significant capacity to launch a thermo-nuclear holocaust against the west – as acknowledged by the Wolfowitz Doctrine. Russia’s borders have been continually closed in on by NATO. Their leaders have been increasingly demonised. They have had outrageous sanctions imposed upon them. They have been blamed for crimes (MH17) they didn’t commit.

        This is not the way for reasonable, rational people to treat a country such as Russia. But of course, the Zionists don’t run their central bank and therefore do not control their people and their government…which is unacceptable to the puppet-masters.

        Collapse of the USD is possibly the only thing that can stop the US Department of Attack and humanity.

    • rowingboat

      DameEdna, with all due respect you have a lot to learn because almost all of the gold ever mined still exists.

      If you want to know where the current gold supply is coming from, it is from former investors in the West who bought it during the last bull market… and the evidence is all there to see in the national import / export data.

      Thousands of tonnes were deposited into UK and Swiss vaults especially during the GFC period, 2008-2012, bullion which has since been sold for equities/corporate bonds etc and that process continues still. Western selling has swamped Eastern buying.

      These things run in cycles my friend, and have done over centuries.

      • DameEdnasPossum

        Yes, no denial…life is a learning experience for us all.

        175,000 tonnes ever mined.

        50% in jewellery, leaving 88,000 tonnes.

        22,000 tonnes consumed by industrial processes, medical, dentistry, electronics etc., leaving 66,000 tonnes.

        30,000 tonnes in central bank reserves – which as we see, across the globe there is an increasing trend of central banks repatriating their bullion…or in the case of Germany anyway…trying to.

        A further 33,000 tonnes of bullion is held in private hands, much of it never to be released at anywhere near the currently discounted prices thanks to paper manipulation.

        The balance of 3,000 tonnes is unaccounted for e.g. Lost, Rothschild’s basement etc.

        In 2013, 2,770 tonnes were extracted from mines, of which approx. 500 tonnes only is made available for bullion, the rest going into jewellery, industrial etc. Yet Chinese and Russian central banks consumed approx. 2,000 tonnes and Indian and Chinese individuals consumed about nother 2,000 tonnes. Taking into account the rest of the global consumption and there must be 3-3,500 tonnes of gold moving from west to east per annum…let’s say that’s 30,000 tonnes of gold coming from somewhere over that time. This is significantly more than the 20,000 tonnes that ended-up in American hands at the end of WW2.

        So tell me, where do you suppose the surplus is coming from and how much longer can this continue? Noting also that this has been increasingly occurring for the past 10-12 years to get to current levels and does not look set to dissipate any time soon. And further noting that not many westerners buy physical gold.

        We are witnessing the biggest movement of bullion in the history of mankind, over a very short timespan and in the most inflated/ rigged markets ever and where paper gold outweighs physical by many many factors.

        Me? I’ll keep buying physical thanks my friend.

        • rowingboat

          The market is more fluid than that and ‘sb’ in the comments section below has kindly posted links for US, UK and Swiss imports/exports:

          You can get the HK data here:

          Take 2013 when HK imported 2,264mt. 40% of this came from Switzerland via UK and there was also a surge from other countries chasing higher premiums in China: UAE, Australia, Canada, Philippines, South Africa, Russia, Thailand and USA. If Western investors increase their demand to the point that gold trades at a discount in China, this bullion would naturally flow to UK / Switzerland instead.

          Just like the UK from 2001-12 HK is now a net importer of bullion, which could therefore feed future Western demand. HK net imported 619mt in 2013, 238mt in 2014 (to Oct) and could be on its way to the 4000mt (approx) net imported to UK from 2001-12. With higher gold prices, scrap supply would increase as well, and you see this is in the data… HK scrap imports peaked in 2011 and have been falling since; the reverse will no doubt happen.

          Also if there were to be a future economic/financial/currency crisis in the developing nations, gold would be sold. I witnessed this on a small scale during the GFC in Australia when our currency plunged, dozens and probably several hundred gold shops opened in the malls for people to sell their jewelry. Morning and evening television interviewed experts about how to get the best price. Gold plunged to $US 700 in the darkest days of GFC before recovering.

          To answer your question, about 4000 tonnes net imported to the UK 2001-12, mostly in the latter part during GFC and about 2000 mt has departed since 2013. I don’t know the numbers for Switzerland but you can eye-ball Koos’ charts, add UK + Switzerland. Compare that with India + China imports from 2001-12 and you see why gold rose so much then crashed.

          In the immediate future, the market needs to adjust to India + China imports with both countries’ gold markets firing on all cylinders again. But I’d urge you to watch the import/export data each month. Swiss imports to China + HK were enormous at the beginning of 2014 then plunged mid-year, picking up again since Oct. The same thing happened with US exports to HK.

          • DameEdnasPossum

            Hi rowingboat.

            Thanks for these details. I’ll dig a bit deeper into the import/ export data to see what I find.

            Enjoy your Christmas and have a few tiger prawns and a cold Coopers or two for me ;)

          • rowingboat

            Central banks had been net sellers since the mid 1990s then flipped to net buyers in 2010. According to Jeff Christian, 54% of this demand is from Russia and ex-Soviet republics. They’re siphoning off local production growth I reckon… Russia will overtake Oz to be the 2nd largest gold producer in 2014, approaching 300mt. Enjoy your Christmas and safe holidays too!

          • KoosJansen

            RE: I don’t know the numbers for Switzerland but you can eye-ball Koos’ charts. Those charts are gross weight, probably not the most accurate. I will soon publish fine weight charts of historic Swiss gold trade.

  • KoosJansen
  • rowingboat

    I noticed this mistake from Bloomberg today:
    “Net imports totaled 69 metric tons in October, compared with 61.7 tons the previous month and 129.9 tons a year earlier, according to calculations by Bloomberg News based on data from the Hong Kong Census and Statistics Department today.”

    How did Bloomberg calculate it?
    90.7mt (re-exports) + 20.7mt (exports) – 33.8 (imports) – 1.4mt (scrap imports) – 7.2mt (coins) = 69.0mt. Except gold coins include “current coins” which are essentially valueless and not gold (page 371):

    China net imported 76 tonnes from HK in October, not 69, so how long has Bloomberg been misreporting this statistic?

    • KoosJansen

      Hong Kong Census told me the Gold Coin category (98002) also includes silver coins, so I wouldn’t be so sure about how much gold is in there. Scrap I never asked but I assume there can be all sorts of material in there, so, again, I wouldn’t be so sure about how much gold is in there.

      97101 is all I use, but I know sb also looks at other categories.

      • rowingboat

        1 tonne of gold is approximately 320,000,000 HK dollars so I look at the value column, and that’s my cut-off for recording. In Bloomberg’s case the coin value in Oct was only 60 million so therefore insignificant. I convert scrap tonnage to gold-equivalent-tonnage and usually the content is very close to pure gold. The coins however aren’t even close especially coming from China and probably mainly silver actually, yes that makes sense.

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