Koos Jansen
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Koos Jansen
Posted on 25 May 2014 by

Chinese Gold Demand Down From Q1, 751 MT YTD

In week 20 (12-05-2014/16-05-2014) gold withdrawals from the Shanghai Gold Exchange vaults, which equals Chinese gold demand, accounted for 30 metric tonnes. 8 tonnes below the year to date average. Although 30 tonnes of demand in one week is not particular low, it seems the Chinese are taking a break from their exceptional strong buying in 2013 and in the first quarter of 2014. From Chinese state TV network CCTV:

I hope to have more information on the potential alliance between the Shanghai Gold Exchange and the Chinese Gold and Silver Exchange, which is based in Hong Kong, in the near future.

The SGE silver premium, as measured by the price of SGE’s most liquid contract Ag(T+D) compared to the COMEX price, stood at 5.4 % on May 16. On that day total SGE silver inventory stood at 76 tonnes.

Shanghai Gold Exchange silver premium

Total silver inventory at the Shanghai Futures Exchange (SHFE), that only has vaults in Shanghai, was 228 tonnes on May 23. Down 954 tonnes from 1182 tonnes on February 8, 2013.

Currently a few silver futures contracts on the SHFE  are in backwardation, for example the December 2014 contract.

SHFE silver backwardation may 23, 2014
Note, the open interest on the SHFE is counted bilaterally, different than from COMEX. For the December 2014 contract there are 209125 longs and 209125 shorts.

On the SHFE the closing silver price on May 23 (of the first delivery month) was 4139 yuan per kilogram. On the South Rare Precious Metals Exchange (SRPME), that has vaults in Hechi, Chenzou and Yingtan, it was 4074 yuan per kilogram. The SGE’s Ag(T+D) contract closed at 4114 yuan per kilogram. The spread between the SRPME and the SHFE has been significantly reduced in the last 10 days.   

Map Chinese silver vaults 

Overview Shanghai Gold Exchange data 2014 week 20

– 30 metric tonnes withdrawn in week 20 (12-5-2014/16-5-2014)

– w/w + 6.95  %

– 751 metric tonnes withdrawn year to date.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 20

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a screen shot from the weekly Chinese SGE trade report; the second number from the left (blue – 本周交割量) is weekly gold withdrawn from the vaults in Kg, the second number from the right (green – 累计交割量) is the total YTD.

Shanghai Gold Exchange withdrawals week 20 2014

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).

Shanghai Gold Exchange gold premiums 2013 2014 week 20

Below is a screen shot of the premium section of the SGE weekly report; the first column is the date, the third is the international gold price in yuan, the fourth is the SGE price in yuan, and the last is the difference.

Shanghai Gold Exchange gold premiums 2014 week 19 and 20

 

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

    Say Koos, Is demand down or is perhaps supply constricted? Two very different causes, one very same effect. Accumulation does not always equal demand. Shanghai markets are limited to real world flow constraints, paper markets are not.
    That said, derivative markets appear still to have the upper hand in “managing expectations”…
    http://roacheforque.blogspot.com

    • In Gold We Trust

      Are there any empty gold shops in China? Not that I know of. I only see decreasing demand this quarter.

      • http://roacheforque.blogspot.com Roacheforque

        Thanks Koos … perhaps demand has indeed cooled. One muses as to why :)

  • V. PUTIN

    Chinese Gold demand skyrockets – the Gold price does…..
    Chinese Gold demand falls – the Gold price does …..

    What does this tell us about the market impact of Chinese Gold demand?

    In contrast, it is possible to observe Gold’s direct correlation – no, surely a causal relationship – with the military success of the Assad regime in Syria, QPR’s 2013-14 Championship campaign and the volume of General Motors cars recalled with safety hazards in the USA.

    People are so obsessed with supposed Chinese demand, they can no longer see what is right in front of their eyes in black and white. Take this news article for instance – which manages to wrap itself in knots in 4 sentences (from Jürgen Fröhlich, Chief-Editor of goldreporter.de)

    – “Swiss Gold Exports Skyrocket As Western Gold Flows East”

    – “This proves that Western central banks have continued to hemorrhage gold out of their vaults, and of course that gold is heading to China”

    -“According to swiss trade statistics published this week, switzerland has exported 2,777.11 metric tons of gold worth 117.68 billion Francs ($132 billion) in 2013….”

    -“Swiss gold imports went up 36 percent to 3,080.45 tons”

    So, in fact, Switzerland was a net importer of Gold in 2013: its not going to China after all – 303 tons didn’t make it any further than Zurich!

    And the conclusion of this analytical masterpiece? –

    “Background: Switzerland is the main hub for gold coming from USA/UK and heading to the East. ETF ingots are melted down and reshaped to smaller bars for the Chinese and Indian consumer market.”

  • Michael Yates

    Now that India will be coming back online this year, have you considered a regular analysis of their buying? Particularly interesting since they may retake their #1 position as the world’s largest gold buyer.

  • chris

    Koos – some background reading for you…because this is critical to understand alongside what is happening in the PM’s…because if this proves (beyond reasonable doubt) that the Fed and it’s agents are buying up the entire Treasury market, then what is the proper value of gold or silver if the Fed’s balance sheet is double, triple, quadruple it’s state value…and what impact the lose of faith and trust?
    ————————–
    Record highs in equities, record lows in bond yields. How has this been achieved? The US created massive new debts to sustain present very slow growth and sold these Treasury’s…but to who?

    US Treasury / Economy trends

    Jan ’00 – ’07 – Mar ’14

    $1 T —> $1.6 T —> $5.95 T (cumulative “foreign” held US Treasury debt)

    25% —> 40% —> 57.5% (% of total outstanding public notes / bonds held by “foreigners”)

    5% —> 5% —> 22.5% (% of total outstanding public notes / bonds held by Fed…Fed primarily held Bills until ’08)

    70% —> 55% —> 25% (% of total outstanding public notes / bonds held domestically (non-Fed))

    6.6% —> 5% —> 2.4% (net interest rate on debt)

    $300B -> $270B —> $223B (net interest paid on national debt)

    $9.2 T –> $13.7 T –> $16.2 T (US GDP = 75% increase)

    $5.7 T –> $9 T –> $17.5 T (National debt = 305% increase )

    CURRENT US TREASURY DEBT BREAKDOWN…

    $17.5 T in US Treasury debt

    minus…

    $5.1 T intra-gov holdings (perpetually rolled over SS and like w/in gov) =

    $12.5 T Public debt

    minus…

    $500 B in “other” debt (Hope Bonds, State / Local Series, etc.)=

    $12 T Public outstanding (tradable)

    Breakdown as follows…

    ——————- FED ($2.3T) — Foreigner ($5.9T) –Domestic($4T non-Fed)

    Bills ($1.65 T) ——> $0 ———–> $600 B ——->$1 T

    TIPS ($1 T) ———> $95 B ——> $300 B ——->$600 B

    Notes ($8 T) ——–> $1.4 T ——> $4.5 T ——->$2.1 T

    Bonds ($1.45 T) —> $750 B ——> $400 B ——->$300 B

    For those 100% of economists wrongly calling for higher yields on bonds in ’14…read and ponder…and realize why doing the exact opposite of what logic dictates has been a winner.

    Treasury accumulation seems to have radically changed since ’07, particularly interesting due to:

    A- collapsing yields

    B- significantly lower US trade deficit (supposedly fewer dollars to be recycled back into Treasury’s).

    C- Declining use of dollars in global trade (Euro, RMB, etc.)

    4 small EU banking center nations have accumulated nearly as much US Treasury debt as China or far in excess of the Core EU and OPEC combined since ’07???

    ’07-’13 net Treasury purchases vs. net trade surplus…

    Banking EU 7-1 ratio ($700 B – $70 B)

    Core EU 1-3.5 ($117 B – $380 B)

    China 1-2.2 ($870 B – $2,000 B)

    OPEC 1-6.5 ($135 B – $700 B)

    BANKING EURO (Treasury holdings)

    ————- Jan ’00——-> ’07 ——> Mar ’14

    Ireland ———$5 B —> $19 B —> $113 B

    Belgium ——$28 B —> $13 B —> $381 B

    Switzerland $18 B—-> $34 B —> $176 B

    Luxembourg – $5 B—–> $60 B —> $145 B

    TOTAL ——-$56 B—->$126 B —> $815 B (650% increase from ’07)

    These nations ran a net trade surplus w/ the US of approx. $10 B/yr since ’07…$70 B net surplus and bought nearly an amazing $700 B in Treasury’s.

    CORE EURO (Treasury holdings)

    ——– ——–Jan ’00—> ’07 ——> Mar ’14

    Germany –>$54 B —> $50 B —> $67 B

    Italy ———>$20 B —> $14 B —> $30 B

    Netherland $13 B —-> $15 B —> $37 B

    France —->$27 B —-> $10 B —> $54 B

    Spain ——>$20 B —–> $5 B —> $23 B

    TOTAL —>$134 B —-> $94 B —>$211 B (225% increase from ’07)

    These nations ran a net trade surplus with the US from $70 B/yr in ’13 to $60

    B/yr in ’07…$380 B net surplus and purchased $125 B in Treasury’s.

    Compare this to China (Treasury holdings)

    Jan ’00 —> ’07 ——>Mar ’14

    $60 B —>$400 B —> $1.27 T (320% increase from ’07)

    China ran a trade surplus of $300 B/yr in ’13 up from $250 B/yr in ’07.

    Stated otherwise…$1.95 T net surplus but “only” purchased $800 B Treasury’s.

    Or compare to “oil exporters” (Treasury holdings)

    ’00 —–> ’07 ——> ’14

    $45 B —> $112 B —> $247 B (220% increase from ’07)

    OPEC ran a $100 B/yr trade surplus w/ the US…net $700 B surplus but only purchased $130 B Treasury’s.

    Or cast the net of interesting Treasury accumulation a little wider…

    GLOBAL BANKING CENTERS (treasury holdings)

    ————- Jan ’00—> ’07 ——> Mar ’14

    “Carribean banking centers”

    —————$35 B —> $68 B -—> $312 B

    UK — ——-$50 B —> $100 B —> $176 B

    Switzerland $18 B —> $34 B —-> $176 B

    HK ———– $39 B —> $52 B —> $156 B

    Singapore —$30 B —> $30 B —–> $91 B

    Ireland ———$5 B -—> $19 B —> $113 B

    Belgium ——$28 B ––> $13 B —> $381 B

    Luxemburg —-$5 B ––> $60 B —> $145 B

    TOTAL —– $210 B –> $376 B —> $1,550 T (410% increase from ’07)

    Nearly a $1.2 T increase in US Treasury debt ownership among these nations w/

    minimal trade surplus… Or stated otherwise, the Fed / “Foreigners” now
    own $7.1 T of the $9.5 T public note/bond market (the market on which all interest rates are derived)…this means the float of domestically held notes/bonds rolling over plus lower new Treasury issuance is less than Fed’s $25 B QE plus continued “foreign” demand…otherwise known as a short squeeze on the largest debt market in the world pushing yields lower and lower (and stocks ever higher by squeezing ever more old money out of low yielding bonds into higher yielding risk).

    fyi – All raw data from TIC and Census…

    Here’s the rub…without QE and big budget deficits there is no GDP or economic growth…but the Fed / “foreigners” are coming close to owning all public note/bonds and working their way on the MBS front. As this is nearly accomplished, there is significantly less money to be pushed out of the fixed income markets…and the only means to continue to push up the stock market and RE will be direct Fed purchasing of indexes or ETF’s and free’er money for RE. This is also known as monetization…writ large. The end game of this has always been very non-linear and stability lost overnight.

  • Dennis Lazof

    Koos,

    Here’s what I don’t understand. With respect to silver, why are the Chinese willing to quickly deplete their stores of the metal? Yes, like in gold, I realize they love the extended period of low-pricing. But the benefit to them is only if they are accumulating during the low-pricing, as they do with gold. I don’t see any explanation for why they would be willing to support low prices by emptying out the SGE silver vaults.

    Even worse since they will be needing increasing amounts of silver in the years to come for industrial and technical purposes (even if willing to rely on gold alone for financial purposes) they are going to be locking in high sustained prices for decades to come, especially with the silver miners hurting so much. I just can’t understand this, while they are so smart and “ahead of the curve” on in global economics generally.

    If you’ve already addressed this somewhere, just refer me to the post. Thank you.

    • In Gold We Trust

      How said they are emptying the SGE vaults? There is just a lot of gold going through the SGE vaults.

      “I just can’t understand this, while they are so smart and “ahead of the curve” on in global economics generally.”

      Common sense? The US has tried to remain a global superpower through their (fiat) US dollar hegemony. This status will not last forever, as we can see “live”

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