Koos Jansen
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Koos Jansen
Posted on 19 Jun 2014 by

Investment Gold Demand Higher In Switzerland Than China?

Just stumbled upon a video which I almost forgot about. It’s an interview with Jeff Christian by Daniela Cambone from Kitco News. They talk about the physical gold market, specifically the role of Switzerland and China. Mr Christian states investment gold demand is higher in Switzerland than in China. I disagree.

A few quotes from Jeff Christian:

There is a tremendous amount of gold moving out of traditional markets, from Switzerland, the UK and New York to China. But there is even more gold going into Switzerland and staying there.

Let’s have a look at the numbers. If we include bullion and coins declared at Swiss customs, Switzerland net imported 295 metric tonnes in 2013. However, the UK net exported 1312 tonnes to Switzerland over this period, Switzerland net exported 913 tonnes to Hong Kong, Hong Kong net exported 1158 tonnes to China, and according to SGE chairman Xu Luode China’s total net import in 2013 was 1540 tonnes. All in all, it’s hard to agree with Mr Christian’s quote.

Switzerland Gold Trade

He continues:

From 2008 to 2013 Switzerland net imported 147 million ounces. About 4 million ounces was used in jewelry and watches, so you have about 144 million ounces that came into Switzerland and stayed there. So investment demand in Switzerland is much higher than it is in China… This is not a China story, you don’t need Chinese demand to see higher gold prices.

The Swiss have net imported about 4600 tonnes from 2008 to 2013. I agree. Though, like Mr Christian points out himself, this was obviously not bought by the Swiss, but by global investors who store the gold in Switzerland. China, one country, has net imported 2700 tonnes (conservative estimate) from 2008 to 2013. Important is that the People’s Bank Of China (PBOC) has a policy that prohibits gold from leaving the country. Chinese net import is literally gold being taken of the global market.

Furthermore, in 2013 Switzerland net imported 295 tonnes (for global investors) and China (one country) net imported 1540 tonnes, in addition to their domestic mining production of 428 tonnes. Investment demand in China is “currently” much higher than in Switzerland. Also because when the Chinese buy jewelry it’s mostly 24 carat, which serves an investment purpose. So I think this is a China story. How can the biggest gold buyer in the world be irrelevant? Perhaps in 2008 China wasn’t the biggest player in the gold market, now it certainly is.

It seems as if Mr Christian likes to depict Chinese gold demand to be insignificant. Not so long ago CPM Group signed a cooperation agreement with the China Gold Association (CGA). As we all know by now, China – suffering from a disproportionate large US dollar position – has a strong incentive to buy as much gold for the lowest possible price. That’s why the Chinese try to make to world believe their gold demand isn’t that much, not to affect the market. The CGA states demand was about 1100 tonnes in 2013 (while the SGE chairman clearly stated on a Chinese gold conference that total demand was more than 2000 tonnes) and the PBOC hasn’t updated their official gold reserve figures in five years. True Chinese gold demand isn’t disclosed by any institution (according to me Chinese non-government gold demand in 2013 was 2197 tonnes). It looks like the CGA cooperates with CPM Group in order understate Chinese gold demand.

CPM Group China Gold Association agreement

One more from Mr Christian:

All these people have been talking about all this gold that has been leaving Switzerland, they are completely off-base. I mean, this is incredibly stupid. They look at the exports, they see the exports, they say that’s all I need, they don’t bother to look at the imports.

I hope he’s not talking about me. I analyze both sides of the trades, always looking at import and export to come up with net numbers – like I just did. When we look at the net numbers it’s obvious there is much more gold going into China than into Switzerland.

Koos Jansen
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  • Cor

    Thanks for your clear and objective analyses.
    I find it important that the conclusions that people spread are cleansed.

  • Mike Hunt

    So what?

    Does this mean we will hold $1280 or will increased Asian imports drive the price lower as they did last year?

  • Cor

    @ Mike: so what?

    Don’t you find it important to be fed with correct statements and analyses?
    To wheat from chaff of the sources is especially important within the goldscene is my opinion.

  • Peter Trzaska

    Christian is a clown. We all know that. However, on this particular, very specific, issue, he is for once not completely misleading. It’s all about who owns that Swiss ‘investment’ Gold….and, yes, it moves out of Switzerland, but ownership does not necessarily always change. lcn.freedgold.com/ These issues are being raised and discussed over at the Free GOLD Extra site, too. ANOTHER disclosed in the clearest possible terms that the g/Gold marketS are nothing if not always opaque. And NO-ONE knows Gold like ANOTHER knows Gold.

  • Shawn C

    Wearing sun glass to interview person…. Am I the only one feel awkward?

    • In Gold We Trust


      • http://roacheforque.blogspot.com Roacheforque

        Ha ha !!

  • rowingboat

    “Perhaps in 2008 China wasn’t the biggest player in the gold market, now it certainly is.”

    Hee-hee good stuff, but try to differentiate stock and flow Koos. Of the 180,000 tonnes in existence how much of that is in China and how much in the West? Who owns the gold sets the price, and China has a long way to go

    So from 2008-13, net 4600 tonnes flowed into Switzerland, net 3500? tonnes into UK, and how much into North America by investors there, taking the cumulative totals in these countries to what levels?? By contrast, China only became a significant importer in 2011.

    The biggest factor in the gold market will continue to be the Western investor, in particular their switching from sellers to net importers again in America and London and, in my opinion, Switzerland increasing their net imports to 500-1000 tonnes again.

    No doubt Western perceptions will also change when more investors here wake-up to how much gold will soon be flowing into China and India on a combined basis.

    • In Gold We Trust

      First of all, nobody knows how much is existence (that’s impossible to know). Probably more than 180,000 tonnes (that number is a myth spread by the WGC). Second, according to my estimates at least 15,0000 tonnes is in China.

      4600 is net.

      What flows into the UK and Switzerland is for the ROW. China is one country, and recently they became the biggest player. Saying “this is not a China story” is insane, China is also taking over the paper markets.

      • http://roacheforque.blogspot.com Roacheforque

        15,000? I was thinking 13000 but you know better than me. When I said 13,000 elsewhere I could actually hear the sound of eyes rolling …

      • rowingboat

        Your 15,000 tonnes includes a pure guess of 3500 tonnes owned by PBOC, right? So really your estimate is at least 12,500 tonnes using official number. And yes, probably the biggest source of error for the 180,000t is the starting point, from memory 10,000t in 1800. At least one geologist I’ve read has said this is far too low.

        But this just reinforces the point even more doesn’t it, that there’s a lot of gold held in the West and I think it’s fair to say “this has been a Western investor buying then selling story”. Christian is just making that point, not to you because you’re both on the same page IMO, but many commentators choose to ignore the large amount of cumulative gold imported into traditional Swiss, NY and London markets. And also the large amount of gold still changing hands in the West, based on the gross amounts mentioned in the interview.

  • http://RonPaulPromise.com Louis Nardozi

    As soon as you see words like ‘stupid’ being thrown out, you know that person is arguing from a position of weakness.

    • rowingboat

      He’s making the point that newsletter writers have ignored the import side. So by extension they’re either stupid or deliberately lying (personally I think it’s deliberate).
      By conveniently ignoring how much bullion investors have been pulling into the West, they are able to use excuses like ‘paper selling’ or central bank leasing to explain away lower prices when many of these investors simply decide to sell.
      Christian isn’t referring to Koos, I’ve no doubt about that.

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