Koos Jansen
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Koos Jansen
Posted on 30 May 2014 by

Chinese Weekly Gold Demand Highest Since Late February, 787 MT YTD

In week 21 (May 19 – 23) Chinese wholesale gold demand, measured by SGE withdrawals, was 36.4 metric tonnes, up 22.98 % from the week before. This is the highest weekly demand since week 9 (February 24 -28). 36.4 tonnes is just shy of the year to date weekly average of 37.5 tonnes. Chinese gold demand has been down in recent weeks from extremely strong in the first 9 weeks of 2014 to less strong in the last 12 weeks.

Shanghai Gold Exchange withdrawals only 2014 week 21

The insight SGE withdrawals give us has again been confirmed by the latest trade data from Hong Kong and Switzerland. Net export of both counties to China mainland in April was down from the previous month. Hong Kong net exported 65.4 tonnes to the mainland in April, down from 85.1 tonnes in March, Switzerland net exported 12 tonnes to the mainland in April, down from 26 tonnes in March. These numbers were expected as they match SGE monthly withdrawal numbers. SGE withdrawals in April were 130 tonnes, down from 147 tonnes in March.

In April the mainland was supplied by 77.4 tonnes from Hong Kong and Switzerland, 33 tonnes came from domestic mining and an additional 19.6 tonnes of supply came from scrap and/or import from other countries. Note, there can be gold en route from being imported till its sold on the SGE and not all gold supplied to the SGE will be withdrawn from the vaults, some members/individuals hold it in their SGE account.

SGE vs COMEX ™ April 2014

Silver withdrawals are unfortunately not published by the SGE, though it wouldn’t be that interesting as gold withdrawals. The Chinese silver market is not constructed as the gold market, hence silver withdrawals wouldn’t inform us about Chinese total silver demand. However, in week 21, we can see that the premium of spot silver on the SGE was still trading at more than 5 % above the international price, measured by the Ag(T+D) contract.

SGE silver premium

On the Shanghai Futures Exchange most silver contracts were trading in backwardation on May 30. This is the curve:

SHFE silver backwardation may 30, 2014

 

Overview Shanghai Gold Exchange data 2014 week 21

– 36.4 metric tonnes withdrawn in week 21 (19-5-2014/23-5-2014)
– w/w + 22.98 %
– 787 metric tonnes withdrawn year to date.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 21

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 week 21 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 premium

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.

Schermafbeelding 2014-05-30 om 14.49.06

In Gold We Trust

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  • Chris Marcus

    So where is it all coming from?

    • RobX

      Like a game of Clue, use the process of elimination of who it is not coming from. In Clue, you actually get to turn the cards over and have transparency.
      Gold movement is typically closely guarded government secrets. The stories of China importing off-record gold from North Korea is very interesting at several levels. The record levels of smuggling gold into India is all off-record.
      One can only guess that the gold is coming from the least transparent place on earth. A place that Congress can not even audit.
      Another question is why is China going to the trouble and expense to build facilities to “remelt” the gold? Are the ID marks on the existing gold bars not good enough?

      At any rate, it would be interesting to see a chart with China and India combined against total world production. Then your question about “where is it all coming from” would need to be in the proverbial all caps.

    • In Gold We Trust

      It came mostly from the UK.

      http://www.ingoldwetrust.ch/are-the-london-gold-vaults-running-empty

      I think a chunk of “western gold” is still in Hong Kong, ready to be imported into the mainland when needed.

  • Silver watcher

    May 30th at Shanghai closing: Western spot approx 3825 CNY
    May 30th at Shanghai closing: Shanghai front month 4119 CNY
    So Shanghai front month Ag1406 is trading at a premium to Western spot of about 7.7%
    Remaining months are, as you say, backward to Ag1406.
    Last time I looked, Ag1406 was UP over 2% YOY, while Ag1412 was DOWN over 2% YOY.
    And from your chart above, Shanghai silver bottomed in April.
    The 7.7% premium is interesting for two reasons:
    1. an actionable arb to the West probably exists and is perhaps being actioned as we speak. You can get change from that arb even if you fly the silver
    2. it suggests physical tightness in China
    (a narrative of physical industrial tightness mostly due to high 2014 PV demand, not yet reported in the West, is in Chinese business media, as I mentioned previously, but the post failed)

    • In Gold We Trust

      What closing time do you use for Shanghai? SGE closes at 15:30 GMT+8, SHFE at 15:00 GMT+8.

      What’s PV demand?

      I just found your comment in my spam box (for whatever reason), I approved it.

      • Silver watcher

        PV=Photovoltaic. Sorry.
        The details are in that google translated futures report on your other post.
        (Whose thesis was: grab the local Ag1406 to 1412 arb, so sell silver! But the local known background of “shelf end tension” was the interesting part.
        I use GMT+8 too, but my calc was only ballpark. Just read the nearest figure to 15:30 Shanghai off a US based feed that quotes in CNY.
        This may be the first hardish evidence of a true industrial silver shortage, for which the silverogosphere has been gasping for ages. Showing up where you would expect it to show up. Which is why I bothered to mention it…

      • Silver watcher

        Still tracking the premium of Shanghai first month vs Comex. I use closing prices because they are more easily accessible so there is an intraday offset, but the trend is clear enough.

        • In Gold We Trust

          The Ag(T+D) silver contract on the SGE just (June 3, 2014) closed at 6.189 % above international spot, Ag99.99 at 8.664 %. On the SHFE the first delivery month silver contract closed at 8.19 % above international spot.

          • Silver watcher

            Sorry for the multiple graphs. The higher percentages on the graph are due to the intraday offset – instructive in itself. Effectively this is the premium plus a downward intraday component when Shanghai is closed.
            I should post a perfectly matched chart of the first month at 15:00 SHFE close, but haven’t really got time to crunch the numbers…

          • In Gold We Trust

            No problem. You can edit posted comments, maybe delete double charts..

          • Silver watcher

            The arb is apparently being closed initially via a local paper transaction. SHFE Ag1406 is down to 4062 (7.5% premium to Comex) but SGE Ag(T+D) is now at 4040 (which is up to a 7.0% premium over Comex) and Ag99.99 still has an almost unch. premium close to 9%.
            Local paper closure of the arb is no doubt a quick, low-risk paper operation initially. It has to be settled with metal in the short term but both contracts are fully deliverable so that will not be a problem at least for June.
            The result of the upward pressure on SGE spot, however, is a further widening of the premium from Shanghai spot to Western spot. No doubt the process of closing the resulting arb will be slower since it involves physical shipments, and the impacts on Western dynamics will initially be hidden or delayed. Nevertheless this level of premium should cause substantial flows. It is an interesting setup to watch.

          • In Gold We Trust

            Ag(T+D) is not fully deliverable. If the shorts refuse to deliver, which they currently do, the longs get a compensation fee. Look at the screen shot; no deliveries, payment direction short to long. Also note the open interest of Ag99.99 is close to zero.

          • Silver watcher

            That is true, but this fact will not stop them initially booking the paper profit. Ultimately they know that they will have to get metal from somewhere to settle their Ag1406 shorts, but they are probably expecting no problem with this. After a bit more searching for local news in the Chinese language zone it is clear that awareness of the supply issues is patchy at best, which may account for their chutzpah. I guess industrialists are using SHFE, which also explains why its premium has been leading.
            I am also watching closely to see if silver has been involved in the triple-counting issues at the coastal warehouses. If so, there may be a scramble for metal developing from people who actually need it for manufacturing but already know it is not there.

  • rowingboat

    How’s the recycled data tracking, Koos?
    SGE deliveries are down 10% this year but settlement volumes appear much higher, Au(T+D) + mAu(T+D):
    http://www.goldminerpulse.com/v/shanghaiGoldExchangePhysicalDelivery.php
    As China tightens credit, e.g. the Forbes article below, I’m thinking more gold may be changing hands internally, initiated by forced sellers needing to raise cash.
    http://www.forbes.com/sites/gordonchang/2014/05/04/can-china-tighten-credit-without-a-crash/

  • http://roacheforque.blogspot.com Roacheforque

    I wonder what impact SGE activity (and expectations of it) are having on (still Western dominated) price “discovery”?

    • Shylock

      its obvious – the price of gold has collapsed BECAUSE the Chinese are buying

      (at least this admittedly absurd notion has a weight of empirical evidence to support it, in sharp contrast to the other daft theories about “backwardation”, TPTB and COMEX inventories as drivers of the gold price)

      Who knows what causes “the Chinese” (as if that was a unitary construct) to hoard of dishoard gold, but it clearly has very little impact on price dynam

  • In Gold We Trust

  • Chris Marcus

    Doesn’t this mean that on an annualized basis that China is importing almost the entire global mining supply?

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