Koos Jansen
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Koos Jansen
Posted on 26 Jan 2016 by

China Stops Publishing SGE Withdrawal Figures


My research into the Chinese gold market started in 2013 when I noted the significance of a number published on a weekly basis in the Chinese Market Data Weekly Reports on the website of the Shanghai Gold Exchange (SGE) regarding the amount of physical gold withdrawn from the vaults. It appeared to me the total amount of gold withdrawn from the SGE vaults on a yearly basis exactly equaled total Chinese gold demand as disclosed in the China Gold Market Report. Consequently, weekly SGE withdrawals served us as an interim indicator for total Chinese (wholesale) gold demand. Subsequently, I started publishing SGE withdrawals every Friday, accompanied with an analysis about the Chinese gold market, which gradually exposed the true size of the Chinese physical gold market. By 2015 the whole gold space was focused on SGE withdrawals!

In addition, genuine Chinese gold demand greatly exceeded Chinese gold demand as reported by the World Gold Council, whose supply and demand data is tracked by most investors around the world. The discrepancy stimulated me to thoroughly investigate the Chinese gold market and SGE withdrawals. Throughout the years all evidence I collected pointed in the same direction; Chinese gold demand is roughly twice as much as what was widely assumed across the globe and SGE withdrawals provide a spy-hole to track the Chinese gold market! However, at the same time my findings were spreading through the gold space the Chinese slowly started to cover their tracks.

Shanghai Gold Exchange SGE withdrawals yearly 2007 2015

The Motive

After the crisis in 2008 it became even more apparent in the higher echelons of the Communist Party that the international fiat monetary system was not sustainable. The development of the Chinese gold market, that has its roots in the late seventies but leaped forward in 2002 when the SGE was erected, had to accelerate to protect the Chinese economy from future turmoil. Being the second largest economy globally but in arrears regarding physical gold reserves – as a result of a closed market since the Communist Party came in power in 1949 – China has a strong motive to buy gold in secret. For, if they would openly buy the volumes they do the gold price would swiftly be affected, damaging China’s window of opportunity in coming on par with Western gold reserves.

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And so, the Chinese decided to roll out more measures to hide their insatiable gold demand. On top of being dishonest about their true official gold reserves and eclipsing gold import data in regular customs reports, the Chinese ceased publishing the (English) China Gold Market Reports and SGE Annual Reports – and by 2014 all existing reports were taken offline. The yearly (Chinese) Gold Yearbook by the China Gold Association was no longer digitally published, only in hard copies. When I asked my contact at the SGE last year if I could purchase a copy of the China Gold Market Report I was told, “due to new regulatory measures the reports are not publicly available anymore”. Be aware, in all the aforementioned reports total Chinese gold demand consistently equals SGE withdrawals – confirming the significance of SGE withdrawals – and the reports exactly disclose total Chinese gold import.

SGE Withdrawals Not Disclosed In Most Recent Data

But hiding the reports was not enough for the Chinese gold market architects. Apparently, the publishing of SGE withdrawals had to be discontinued, as it simply attracted too much attention to the true size of the Chinese physical gold market. The (Chinese) Market Data Weekly Reports on the first two trading weeks of 2016 at the SGE listed no withdrawal figures.

In an announcement on the SGE website from 11 January 2016 it stated the giant bourse would henceforth publish its weekly “delivery amount” (total deliveries from both spot deferred products and physical products) and “load-out volume” (withdrawals). Though in week 1 there was no “load-out volume” published and the disclosed “delivery amount” excluded delivery of physical products as I reported last week. The reporting by the SGE in week 1 did not match the announcement.

The 2016 week 2 report is different, now it seems the top left number (247,201.86 Kg) in the overview table indeed resembles total deliveries of all spot deferred products (114,536 Kg) plus total deliveries of all physical products (182,833 Kg). Yet, the sum of both deliveries is 297,359 Kg according to my calculations, not 247,203 Kg. So, I’m probably missing something, in any case SGE withdrawals are not disclosed!

Screen Shot 2016-01-25 at 11.32.10 pm
Overview table 2016 week 2 report. The “delivery amount” is the total amount of gold that has changed ownership in one week. 
Screen Shot 2016-01-17 at 5.49.15 pm
Overview table 2016 week 1 report including translations.

When I called the SGE I was told the “load-out volume” (withdrawals) will not be published anymore, a statement that matches the new reports. This is a disaster for the gold community. SGE withdrawals provided a unique transparent metric for Chinese gold demand and it’s gone. However, the fact the Chinese stopped publishing SGE withdrawals once again strongly confirms the importance of these numbers from the past! Until December 2015 these numbers gave us a direct measure of Chinese wholesale gold demand. The truth became a little uncomfortable for the Chinese.

Ah well, I guess I’ll be focusing more on other gold markets from now on ;-)

Koos Jansen
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  • http://roacheforque.blogspot.com Roacheforque

    Despite the ongoing details Koos, the larger point was well made. The remaining question to be calculated: how much gold does China THINK it needs to clear it’s massive debt, and to enable it’s 5 year plan?

    We have been talking about what HSP just penned for many decades:

    This is just another iteration of the FREEGOLD conclusion, which clearly is not lost on the China plan. As “Another” said long ago, these deals are not done in some public fishbowl for all to see.

    The SGE fishbowl now has a curtain drawn over it. Perhaps in part due to the light of truth you have shone upon it. You should be proud of that light. The roaches will always scurry away to dark corners when it shines.

  • sb

    We still have got Swiss, UK and Hong Kong data, which should give us a pretty good understanding of China demand. Dec 15 was a very strong month, huge China imports from Hong Kong and Switzerland, probably around 200 mt in total.

    By the way LBMA updated their website, they claim now 6500 mt of gold in London vaults.

    • https://www.bullionstar.com/blog/ronan-manly/ Ronan Manly

      Well spotted about the 6500 tonnes…http://www.lbma.org.uk/vaulting.

      So, that figure was reduced from 7500 tonnes which was on the LBMA website as late as September 2015 or maybe even a bit later https://web.archive.org/web/20151009064927/http://www.lbma.org.uk/vaulting.

      But the 6500 tonnes update is now more in keeping with the LBMA statement from June 2015, which said “There are ~500,000 bars in the London vaults, worth a total of ~US$237 billion”

      This US$237 billion was estimated to be about 6256 tonnes, which is fairly near the updated LBMA figure of 6500 tonnes.

      All of these figures will at the end of the day only be estimates anyway but appear to show a downward trend.

      • https://www.bullionstar.com/blog/ronan-manly/ Ronan Manly

        Although, having updated the figure to 6500 tonnes in the page http://www.lbma.org.uk/vaulting

        the same page still says that 500,000 bars are held at the Bank of England, which is clearly not possible if there are only 6500 tonnes in all the London vaults, unless only about 250 tonnes are held in all the vaults outside the Bank of England.

      • sb

        Yes it is a confirmation of some big (500mt) monetary gold withdrawals from London. Net UK exports of non-monetary gold were around 400-500 mt per year in 2014 and 2015.

    • rowingboat

      I agree, and Swiss transparency is the most valuable piece as it covers the historical 1982+ when NMG in the world has more than doubled. China is part of the market but only one component.

      Jiang Shue of the Shandong Group understands in this very interesting speech, link below. Indeed if US interest rates don’t rise this year as many expect, his argument implies Chinese demand could very well increase further (along with the rest of the world):

      “It is interesting to note that when international investors met Chinese investors, the international investors were eager to gather information or even gossip about China’s jewellery demand and China’s gold reserve movement.
      At the same time, China’s investors were anxious to know how the US economy was and when the Fed would raise the interest rate.

      We have collected 588 titles from gold analysis reports or articles from a very
      popular Chinese financial website, Hexun, from the beginning of this year to 6
      September. Among these 588 titles, only 28 titles mention China as the gold price’s driving force, which represented only 4.76% of the whole sample, while 373 titles associated the US dollar and US things with gold price volatility, which
      represented 63.43% of the whole sample.”


      • JanNieuwenhuijs

        Some “really smart people” I know in China tell me Hexun is the worst website ever. Kind of like the Sun in the UK.

        Re Jiang Shu, the guy copied MY writings for his LBMA presentation. Read after the 10th paragraph or so https://www.bullionstar.com/blogs/koos-jansen/the-lbma-conference-and-the-confusion-about-gold-round-tripping/

        • rowingboat

          Hexun is a financial portal and the biggest one in China, right? The quality doesn’t really matter if that’s what people are reading. If Jiang Shue’s paper is correct and the quoted numbers in the speech are anywhere near correct, it implies that most Chinese investors look to changes of US monetary/fiscal policy as the main driver of gold prices, which has interesting implications.
          I thought he did a good job explaining why Chinese demand isn’t inflated, in particular:
          “Gold-leasing in China has become a standardised loan-like product of banks. Just like the effective money multiplier in macroeconomics, China’s 1,371 tonne gold-leasing volume needed much less gold. The gold-leasing business does not keep a large portion of gold from China’s real demand.”

  • Albert

    Back to Hong Kong import numbers and US Mint sales.

  • philipat

    Jan, China being China, I’m sure that you will be able to find a “source’ even if the data is no longer published? It is a shame, though, that such data will no longer be as credible in challenging the WGC/GFMS figures for Chinese consumption. Which will make the Western Establishment as happy as the Chinese Establishment…..

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