Koos Jansen
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Koos Jansen
Posted on 23 Apr 2014 by

Chinese Gold Demand Dropping

It has been a bit silent on In Gold We Trust for a few days as I was working on moving this website to a new server, which didn’t happen as planned. Yesterday the website has been offline for hours due to transition. I was forced to move because the old server couldn’t handle the repeated DDoS attacks, the new one is supposed to be better armed providing visitors, finally, stable and faster access.

Anyway, I still owe you guys un update on withdrawal numbers from the SGE, published last friday April 18. SGE withdrawals, which equal Chinese wholesale demand, in week 15 (08-04-2014/11-04-2014) accounted for 21 metric tonnes. A lot of gold but the lowest numbers since March 2013 – also due to the fact the SGE was closed on April 7, leaving only four days of trading in week 15. Nonetheless, demand has been in a downtrend for six weeks in Shanghai and premiums have been sub zero since late February, which doesn’t hint at a supply shortage on the SGE. At the same time we saw GOFO rates being negative in week 15 in western markets, which does hint at supply shortages. This situation illustrates the PBOC’s gold policy; gold is allowed to be imported but not exported.

GOFO 2013 - 2014

Overview Shanghai Gold Exchange data 2014 week 15

– 21 metric tonnes withdrawn in week 15 (08-04-2014/11-04-2014)

– w/w – 16.7 %

– 606 metric tonnes withdrawn year to date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 15

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a screen shot from the weekly Chinese SGE trade report; the second number from the left (blue – 本周交割量) is weekly gold withdrawn from the vaults in Kg, the second number from the right (green – 累计交割量) is the total YTD.

SGE withdrawals

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).

SGE premiums

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.

SGE premiums

Koos Jansen
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  • MrYellow

    So the negative GOFO was not about huge Chinese demand…

    What is it then about?

    • ExWarmist

      MrYellow asks an excellent question. Who else is squeezing the market?

      Another angle, are the Swiss Refineries still running 24/7 at maximum capacity?

    • rowingboat

      The gold price is set by people who own it, first and foremost and it’s called ‘reservation demand’. If price drops far enough supply will dry up, which is what a negative GOFO indicates. There are 9,000 tonnes in London so what owners of this gold decide to do is obviously very important, plus how many thousands of tonnes are held in Switzerland and America. Chinese premiums are near zero and have been for most of 2014, so a negative GOFO is not about them… more like less willingness on the part of Westerners to sell for whatever reason, which of course is also a function of price.

      • In Gold We Trust

        Are you sure about those 9000 tonnes? This number is from the LBMA website right?

        • rowingboat

          that’s right Koos, but the number is believable in my view. The pieces of the puzzle are being put together from various sources by focusing on physical flow, and we’re able to cross-check their consistency

          Off the top of my head, i can’t be bothered checking I’m too busy, but 3800 tonnes net imported into UK from 2005-12. Also 2/3 of the 9000t we know is at BOE with 2800t net increase in BOE’s vaults from 2005-2012. (Next BOE annual report will be available in June for Feb 2014 holdings).

          that means net 1000 tonne increase elsewhere in LBMA system from 2005-12. So what did LBMA hold in London just before 2005?…. 3000t (lbma website) minus 1000t = 2000t seems reasonable to me, perhaps even on the low side. (From the WGC data, we know UK consumer demand is almost negligible).

          the figures may be guesstimates and ball-park but their magnitude is significant given the rate of Chinese imports.

          Note Keith Weiner’s latest suggesting market stress far into the future… imo, the market knows UK can’t keep importing for very long at this rate. GLD holdings, a proxy for Western investor supply/demand, is stable this year and perhaps 4000 tonnes of BOE gold is owned by central banks. Is there data out there for this? I think Australia stores its gold reserves in London

  • Jeffrey

    not surprising! India is back on-track buying again and they may very well be running out of physical stocks in the WEST! Also, with China bringing Gold in thru Beijing, this could have an effect as well! Over 600 tons in less than 4 months is amazing no matter how what!!!!! Thanks Koos! Keep up the great work!

  • David Jensen

    Yes – the Beijing gold imports may be bypassing the SGE and going directly into the PBOC or the hands of high net worth individuals diminishing visible Chinese gold demand.

    There are also more buyers of gold from the West (London) than the Chinese. Increasing discussion about gold currency for oil has to be getting some of the sleeping money moving. Perhaps oil will not always flow in return for confetti.

    • In Gold We Trust

      It doesn’t matter through which port the gold is imported (Shenzhen, Shanghai, Beijing), it is always required to be sold through the SGE. Next to this PBOC imports are invisible. The PBOC importing gold through Beijing would not tell this to Reuters.

      • Lulzasaur

        wait, koos, can you clarify this more? My impression of the reason for this import was that they did not need to register the trade on the exchange. Do you have any data/article that indicates the imported gold must still be sold through the SGE?

        If what you say is correct, however, and the latest data shows that demand has gone down, what do you think this means for China?

        • In Gold We Trust

          For instance the latest WGC report.

          • In Gold We Trust
          • Lulzasaur

            I see. Could you also clarify if the PBoC is buying gold directly now? (either through Swiss refineries, etc etc). Does this imply that it is relying less on these “satellite” banks to purchase its gold since they would have to do it through the SGE (thereby exposing transparency)? and, finally, would this mean that these chinese bullion banks would stop shorting gold on the futures market as the CB can now use other methods of obtaining the shiny precious metal?

            Sorry if the logic seems so contrived. It’s just the natural set of questions I can come up with. Any clarification and/or correction to these statements is welcome.

          • In Gold We Trust

            I don’t know anything about PBOC purchases, except that these are very secretive. From where I stand now I still think the PBOC would not buy through the SGE, more likely directly in London or elsewhere through proxies.
            I can’t draw any more conclusions on recent events, or else I would have written them in the article..

          • Reincarnated FF

            Could it be that China is attempting a head fake in order to keep the gold price down by showing the SGE import figures lower, while making up the difference through the PBOC? Considering China’s appetite for gold, one would think they’d try to suppress costs. Secret is as Secret does after all.

      • Reincarnated FF

        How much credence can we place on China following “the law”? I hope it’s considerable more than what we witness in the USA!

  • Jeffrey

    You are making assumptions when you say gold demand has gone down! Maybe that was all the gold that was available or maybe they are bringing more in secretly or many other scenarios!
    It is simply one weeks worth of data, actually 4 days! Maybe the military has stepped up secret operations! Remember China likes to keep all this secret!

    • rowingboat

      Read sb’s post above. The UK and Switzerland are now exporting less gold to China. China may try to to conceal how much they’re importing but by following UK and Swiss import/export data we have a semi transparent view of what’s happening. Steve Rocco tracks American imports/exports so this is the third main piece of the supply puzzle.

      On the other side of the equation, Koos has a great handle on Chinese demand. Everything adds up in my view and Keith Weiner’s analysis is the confirmation pulling it all together. Why is Chinese demand down? Could it be a credit crunch and some people owning gold needing to sell for cash… net result, less need to import from outside of China?

    • In Gold We Trust

      Its six weeks of data, and premiums are low/negative. There is no shortage of gold in China now and thus demand is taking a break at the moment.

  • Jeffrey

    China allows gold imports via Beijing, sources say, amid reserves buying talk

    Sun Apr 20, 2014 5:00pm EDT



    Share this



    Related Topics

    Basic Materials »

    Financials »

    * Beijing is 3rd mainland gold import point, after Shenzhen& Shanghai

    * China’s gold imports from Hong Kong surged to $53 bln in 2013

    * China’s central bank has been adding to official gold reserves – WGC

    By A. Ananthalakshmi

    SINGAPORE, April 21 (Reuters) – China has begun allowing gold imports through its capital Beijing, sources familiar with the matter said, in a move that would help keep purchases by the world’s top bullion buyer discreet at a time when it might be boosting official reserves.

    The opening of a third import point after Shenzhen and Shanghai could also threaten Hong Kong’s pole position in China’s gold trade, as the mainland can get more of the metal it wants directly rather than through a route that discloses how much it is buying.

    China does not release any trade data on gold. The only way bullion markets can get a sense of Chinese purchases is from the monthly release of export data by Hong Kong, which last year supplied $53 billion worth of gold to the mainland.

    “We have already started shipping material in directly to Beijing,” said an industry source, who did not want to be named because he was not authorised to speak to the media. The quantities brought in so far are small, as imports via Beijing have only been allowed since the first quarter of this year, sources said.

    The People’s Bank of China (PBOC) is believed to be adding to its gold reserves, according to the World Gold Council (WGC), as it looks to diversify from U.S. Treasuries. The central bank rarely reveals the numbers.

    Gold’s 28 percent plunge last year and China’s record bullion imports in 2013 sparked speculation that the PBOC has added significant amounts of gold to its reserves, and could likely make an announcement this year.

    Central banks tend to be very secretive about their gold purchases and sales because prices are extremely sensitive to their trades. Rumours last year of Cyprus selling its gold reserves to prop up finances sent the metal down more than 10 percent over two days – its biggest such decline in 30 years.

    Gold has traditionally been imported from Hong Kong into Shenzhen, where nearly 70 percent of the Chinese gold jewellery business is located. Shanghai was opened up as a second port last year.

    Only banks are allowed to import gold into China. Industrial and Commercial Bank of China Ltd, Agricultural Bank of China Ltd, ANZ and HSBC are among the 12 banks that can import gold.


    China imported nearly 1,160 tonnes of gold from Hong Kong last year, more than twice that of 2012 as the drop in prices caused a spurt in demand.

    An analysis of trade figures from data provider Global Trade Information Services showed that China imported at least another 194 tonnes last year from centres other than Hong Kong, likely into Shanghai, showing that direct imports have ramped up.

    One of the reasons why China could be encouraging more direct imports was because it wanted to avoid taking the Hong Kong-to-Shenzhen route that makes its gold purchases public, while China wants to keep the trade a secret, sources said.

    “There is a view that why should people know how much China is buying,” said one of the sources at a bullion banking operation in China. “With the Hong Kong route, there is a lot of transparency and people can easily monitor what is going in and out.”

    Another source said the move to open up Beijing “is partly driven by the fact that Hong Kong is perhaps a little too transparent”, but it is also to accommodate upcoming free-trade zones and non-jewellery demand.

    The Shanghai Gold Exchange, the platform for all physical trades in China and in whose vaults importing banks store gold across the country, was not immediately available to comment.


    Besides the 1,160 tonnes of gold imported from Hong Kong last year, China had about 428 tonnes of local production. The WGC has said Chinese demand in 2013 was 1,066 tonnes, leaving industry guessing about the “surplus” of around 522 tonnes, not including the amount of direct imports.

    The central bank last disclosed its gold reserves in 2009, when it announced that its bullion holdings had risen to 1,054 tonnes from 600 tonnes in 2003.

    Philip Klapwijk, managing director of Hong Kong-based consultancy Precious Metals Insights, has said China’s official-sector purchases could have totaled 300 tonnes in the first half of 2013, and the pace likely continued in the latter half.

    “The major increase in gold supply to the Chinese market in 2012 and especially 2013 could be partly related to large-scale official purchases,” according to a Klapwijk-led survey for the WGC that was released last week.

    The report said while a part of the surplus was being used for commodity financing deals, some of it could be for the PBOC as well.

    Rumours on PBOC’s gold reserves range from 3,000 tonnes to 5,000 tonnes. The United States is the biggest holder of gold reserves with over 8,000 tonnes.

    Even a 1,000 tonne increase from last announced levels could prompt a jump in gold prices, which would make the PBOC very cautious about the timing of any announcement, said two China gold market analysts, who didn’t want to be named due to the sensitivity of the issue. (Editing by Muralikumar Anantharaman)

  • Jeffrey

    See article below! Things are kicking into overdrive now!!!! Heard from the WGC yesterday in video posted on Goldsilver.com that there are now 100,000 locations to buy gold in China now! Think of this, there are 50,000 Starbucks locations in the US! This is huge and things will change fast as soon as the West runs out of gold to sell to the World! Remember this is not just a China story, much of the East is stock piling and getting ready for the dollar collapse!

    • http://www.fuckoff.com Joep Meloen

      There are 4 times more peolpe in china so 100.000 is relatively low compared to 50k.
      Also, starbucks is 1 company. If you add up all coffee corners you end up with maybe millions of places to buy coffee.
      You are comparing apples with oranges.

      • Jeffrey

        Joep, it just gives an example of how many stores that is and your argument is irrelevant, the US is bigger than China in land mass, just means the lines are longer! Damn! So sick of the nit picking stupid comments here!

  • Michael Yates

    Damage is done anyway. Mines are shutting, CB’s are decimated, Comex is empty, and due to price manipulation we can expect production to fall in the coming years. India will be ramping up purchases by fall, so whatever reduction in Chinese demand occurs will be compensated for by India.

  • sb

    Switzerland exports to HK/China dropped to 51mt in March (from around 115mt/month). Imports from the UK dropped to 38mt (from around 115mt/month). It looks like that the recent movements of gold from London to China were driven by China demand.

  • Navigator

    Maybe your title is incorrect. Maybe demand for gold from the SGE is very high but the gold is simply not in the SGE to withdraw.

    • In Gold We Trust

      With negative premiums?

      • Navigator

        Maybe there is a time lag for the negative GOFO in the west to work its way into China. Negative GOFO in the west and negative premiums in China do not make sense but you would expect a supply shortage first in the source (the west) before this shortage would affect China. If you have other ideas about why there is a difference between the West and China in terms of availability I would love to hear it.

        • Mrs Watanabe

          Negative premiums in China do make sense when put in context of a depreciating currency cross. The CNY is a depreciating currency, look in January the USDCNY rate was 6.014 if Koos uses January’s USDCNY exchange rate and not today’s USDCNY rate of 6.256 to make the calculation, there would be no negative premium at all. Clearly the depreciation in the CNY complicates and confuses matters and am sure someone could argue the bear side, but currency devaluation should be taken into account when talking about premiums or no premiums.

  • Jeffrey

    Navigator, exactly! Days are numbered for the criminal elite! That is why they are hitting the gold and silver Prices hard today! But the weak hands already sold and strong hands continue to grab all they can!!!!! Gold and silver are the people´s money, paper is their money!

  • houtskool
  • MrsWatanabe

    Koos, am not sure if you have mentioned this in other articles? But we have a depreciating Chinese Currency (USDCNY) on the one hand and on the other negative to par premiums in Shanghai? Can you comment on this, am trying to figure out if there is a connection?

  • Jeffrey

    Lets also remember, 2250 tons went thru Dubai last year! The amount of gold moving to that part of the world is astounding!


  • Jeffrey

    Koos, from the LBMA website: In total there is approximately 9,000 tonnes of gold held in London vaults, of which about two thirds is stored in the Bank of England.
    Like we can believe anything they say! Fact is, Heard from Turk, and other people that the bars Swiss refineries are getting now are bars from the 60´s or before!

  • Dennis Lazof


    thank you for all your dedication and making this information available to the general public.

    where does your analysis include the gold that is coming out of the world’s largest producer and remaining within the country BUT possibly that portion that is bought by the government, refined in country? what makes you think that PBOC does not have its own vault, given that they are currently (last several years) trying to downplay total Chinese holdings? You do state that SGE withdrawals are approximately what you assume to be wholesale demand -but such government holdings would not ever hit any wholesale or retail market.

    You or another reader could just give me the reference where I should look. Thanks.

    • In Gold We Trust

      I think the PBOC does have its own vaults and that it does not buy its gold through the SGE. In other words those purchases are completely invisible, except for those working at SAFE, BOC and the PBOC probably.

      • Dennis Lazof

        thank you. Of course, and you would be correct not to speculate on the amount if it’s truly invisible. Then, the most anyone fair might suggest is that you occasionally mention that this portion of Chinese holdings is unknown.
        1) we do have some figures (I don’t know how good) for chinese mine production though don’t we? After all, everyone seems to agree they are the largest gold producers -that’s got to be based on something.
        2) how good are the production figures for China? Also a partially hidden/ secretive number?
        3) so we have no idea what percentage of the national chinese production goes to market? do you know the tonnage going through the SGE that is from new chinese mine production (even if not what percentage of total production)?

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