Koos Jansen
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Koos Jansen
Posted on 20 Mar 2015 by

SGE Withdrawals 51t In Week 10, YTD 508t.

Withdrawals from the Shanghai Gold exchange (SGE), which equal Chinese wholesale gold demand, in week 10 (March 9 – 13) accounted for 51 tonnes. Year to date total withdrawals have reached 508 tonnes.

Screen Shot 2015-03-20 at 10.29.49 AMScreen Shot 2015-03-20 at 10.29.29 AM

Chinese wholesale gold demand can be slightly less than what is disclosed because of withdrawals from the Shanghai International Gold Exchange. My best estimate is SGE withdrawals could be 3 tonnes less at 505 tonnes. However, I have no hard evidence any foreign traders are withdrawing gold from the Shanghai International Gold Exchange. I’ve made an inquiry at the SGE if they can shed some light on this. Hopefully, next week I know more.

Shanghai Gold Exchange SGE withdrawals delivery 2015 week 10 dips

Shanghai Gold Exchange SGE withdrawals delivery only 2014 - 2015 week 10

Week 10 was a clear example of a falling gold price in renminbi, which spurred the Chinese to purchase gold at the SGE and subsequently withdraw from the vaults.

BullionStar has a new unique feature online; a chart widget to measure anything in anything (stock indexes, precious metals, fiat currencies, commodities and stocks). For example Gold in Euros, the S&P 500 in Crude Oil, or US dollars in Renminbi. The next screenshot is an example of the price of gold in renminbi in week 10, 2015.

Screen Shot 2015-03-20 at 3.11.18 PM

Click here to use the widget!

Because of the mechanics of the Chinese gold market,

Import + mine + scrap = SGE withdrawals

And thus

Import = SGE withdrawals – mine – scrap

Over the first ten weeks in 2015 domestic mine supply has been roughly 85 tonnes, SGE scrap supply (at a yearly rate of 250 tonnes) approximately 45 tonnes.

508 withdrawals – 85 mine – 45 scrap = 378 import

From January 1 until March 13, in just over two months, China has imported an estimated 378 tonnes.

A rough estimate suggests SGE withdrawals are set to reach 600 tonnes in Q1; net import 450 tonnes, domestic mining 100 tonnes and scrap (gold-for-gold and gold-for-cash) 50 tonnes. Depending on what metric used, Chinese gold demand will be somewhere in between 570 and 600 tonnes. Let’s wait what the World Gold Council (WGC) will publish as Chinese gold demand Q1. Probably about half of this, just like they did last year.

While the WGC is understating Chinese gold demand, it’s allegedly overstating Vietnamese gold demand. I came across an article titled; Experts doubt WGC’s report on Vietnam’s gold consumption:

VietNamNet Bridge – The World Gold Council (WGC) has reported that Vietnam consumed 69.1 tons of gold in 2014. However, Vietnamese experts disagree with that assessment.

“It is unclear where WGC sought information to make report. But I can say for sure that the total revenue of all Vietnamese gold companies could not make up such a figure,” he said.

Trong said a large jewelry company needs about 200 kilos of materials a month to make jewelry.

The number of large jewelry companies can be counted on one hand or two, and the actual volume of gold materials is not high.

Other goldsmith shops mostly process finished products they buy from customers, and do not have demand for gold materials.

“12.7 tons of jewelry gold consumed in 2014 was reasonable, if counting the jewelry illegally imported from China. The jewelry market last year was very gloomy,” he noted.

“The remaining 56.4 tons of gold was listed as bullion gold for investment. However, it’s unclear where the imported bullion gold has gone,” he said.

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  • sb

    India is buying lots of gold in March. Around 130 mt so far, there is a good chance that total in March will be over 150 mt. India seems to import less from Switzerland now but more from gold mining countries (Australia, Ghana, SA, Peru) directly.
    It’s a shame that LBMA doesn’t publish GOFO rates any longer, London gold market is probably tight at the moment.
    Today’s COT report showed a big short position of money manager, 79k contracts. They need to cover this short, which is bullish.

    • rowingboat

      thanks for the India update, sb.
      Check out Keith Weiner’s analysis of the basis & cobasis at Monetary Metals (the gold market is very tight). He’s been bearish on silver for years but changes seem afoot there too.
      Any observations looking at the historic Swiss import/export data now that it’s available? Most of Australia’s gold goes to HK when it used to flow to UK / India. I’m sure we’ll see big exports from Switzerland to India in March when the data is available (and the accompanying flow from UK to Switzerland).

      • sb

        GOFO is now quite negative because of India surge in imports. Below my reconstruction of GOFO from spot and futures prices.

        • KoosJansen

          Remarkably Indian premiums are “flat” around 12 % through March.

          • sb

            Where do you get your India premiums from?

            This guy claims they are going up


          • KoosJansen

            From sharelynx data

          • KoosJansen

            Btw, his “GOFO” differs from yours no? Or you have these GLR’s?

          • sb

            Sharelynx chart is for GLR, my is GOFO. You could get GLR from GOFO by inverting it shifting by around 20bp

            I’ve already talked to Nick from Sharelynx, he is using only the futures so he misses very short end of the GOFO curve. That is why his reconstructed GLR doesn’t have Nov-14 spike. He is planning to improve his estimation by using spot price.

            My chart has more to do with what Keith from monetary-metals is doing. He calculates basis (spread between spot and the first future) but he doesn’t convert it into GOFO or GLR.

          • KoosJansen

            Groovy. I’m gonna read a few more books before I publish these charts 😉

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