Koos Jansen
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Koos Jansen
Posted on 15 Apr 2014 by

SGE Withdrawals Equal Chinese Gold Demand, Part 3

On April 4, 2014 Alasdair Macleod published an extensive analysis on the Chinese gold market. I felt obligated to respond to it by sharing my point of view and explain where I disagree with his analysis. I think his estimates are largely overstated because he double counts certain demand categories. He states Chinese gold demand in 2013 was 4843 metric tonnes, according to me it was 2197 metric tonnes (my estimate excludes some hidden demand and PBOC purchases on which I have no hard numbers). Setting out our differences was incidentally a good occasion for me to write another in-depth analysis on the Chinese gold market.

I highly respect Macleod, who was probably working in finance when I was in diapers, and I’m very grateful he has been using my findings about SGE withdrawals and the structure of the Chinese gold market. I see very little commentators stepping into this realm, though it’s truly the most important economic event happening in our time. Having said that, my concern is the accuracy of the data being spread. I present my analysis:

For all clarity please note I make a clear distinction between deliveries and withdrawals since a couple of months, as they do not relate to the same data. The SGE uses the term deliveries inconsistently which has caused for confusion.

Let’s go through the aspects of the Chinese gold market in random order; PBOC demand, the SGE, domestic mining, mainland net import and Hong Kong trade.

PBOC Gold Purchases

Macleod states all Chinese domestic mine supply is soaked up by the PBOC, according to my analysis this is not likely to be the case.

The main objectives for the PBOC to accumulate gold are:

– Supporting the renminbi for its internationalization (adding trust and credibility)

– Owning hard currency as the cornerstone of capitalism.

– Owning reserves that protect the Chinese economy from external/internal shocks and inflation.

– Owning reserves that are not controlled by a foreign nation (the US).

– Diversifying its excessively large USD reserves prior to an irrevocable USD devaluation.

– Hedge their exorbitant USD reserves.

In my opinion the PBOC (or its proxies SAFE and CIC) does not purchase gold from domestic mines or from the SGE. The PBOC’s incentive is to exchange USD’s for gold, preferably buying undervalued gold with overvalued dollars. Hence the PBOC buys in utmost secrecy, not to affect the market.

It wouldn’t make sense for the PBOC to buy gold from domestic mines because they would have to pay in RMB. This wouldn’t fit all their objectives mentioned above. Additionally Chinese law dictates all domestic gold mining output is required to be sold through the SGE (page 15). Last, I personally have never come across any evidence the PBOC has bought domestic mine supply in recent years.

Before the liberalization of the Chinese gold market in 2002 the PBOC did buy all domestic mine supply because the PBOC had the monopoly in the Chinese gold market; the PBOC was the Chinese gold market. A brief history lesson from SGE president Wang Zhe in 2004:

In April 2001, the governor of the PBOC announced the abolishment of the gold monopoly with a planning management system. In June of that year, the weekly quotation system for the gold price officially came into operation, which adjusted the domestic gold price in accordance with the price on the international market. The Shanghai Gold Exchange (SGE) officially opened on 30 October 2002, representing an important breakpoint in the revolution of China’s gold system, and reflected the great progress being made.

From chairman of the SGE board, Shen Xiangrong, in 2004:

After the PBOC abolished the monopoly on gold allocation and management, the SGE assumed the basic role of allocation and management of gold resources, stipulating the healthy and orderly development for gold production, circulation and consumption.

When the SGE was launched in 2002, the gold market wasn’t liberalized overnight, as one can imagine. It took a couple of years before the market functioned as the PBOC had intended. The intensions were, inter alia, to let the free market set prices and all imported and mined gold was required to be sold first through the SGE. The reason to channel fresh gold (import and mine supply) through one exchange is to keep track of the gold added to non-government reserves (jewelry, bar hoarding, institutional buying, etc). By requiring all fresh gold to flow through the SGE the PBOC can efficiently supervise the quality and quantity of the gold that enters the Chinese market place. The PBOC wants to know exactly how many grains of fine gold are being held among the people. Additionally scrap gold is allowed to be sold through the SGE, but because this type of supply doesn’t affect reserves, it isn’t required to be sold through the SGE (it doesn’t have to be monitored).

The structure of Chinese physical gold market with the Shanghai Gold Exchange at its core entails SGE withdrawals equal Chinese wholesale demand. This has been published by the SGE Annual Reports, China Gold Market Reports and CGA Gold Yearbooks 2007-2011 (I’ve written and extensive analysis on this theorem which you can read here). Unfortunately only a fraction of all these reports is publically available; if you study the rest and gather all bits and pieces you can make an informed analysis.

Through analysing data from 2002 to 2011, after 2011 the Chinese were reluctant to publish reports as this information became too sensitive, we can clearly see how the SGE and the Chinese gold market have developed.

The next table is from the China Gold Association (CGA) Gold Yearbook 2006.

Exhibit 1. The number circled in yellow is a typo (see exhibit 2).
Exhibit 1. The number circled in yellow is a typo (see exhibit 2).

I made a translated version:

Exhibit 2. I corrected the typo.
Exhibit 2. I corrected the typo.

Whilst we can see that SGE withdrawals grew from 2002 to 2006, moreover the table exposes SGE withdrawals grew relative to total supply.

The next table shows SGE withdrawals compared to total demand; the top row shows SGE withdrawals, note another typo, the bottom row is SGE withdrawals relative to (%) total demand. These tables illustrate the PBOC’s intention to match supply, SGE withdrawals and demand. Although they didn’t immediately succeed in 2002 when the gold market started to liberalize, in 2007 the CGA reported for the first time SGE withdrawals equalled demand for 100 %. As mentioned before, in the years after 2007 this continued to match (as I have demonstrated here)

Exhibit 3. The number circled in yellow I know for sure is a typo because I cross-checked the number with two other reports.
Exhibit 3. The number circled in yellow I know for sure is a typo because I cross-checked the number with two other reports.

From the CGA Gold Yearbook 2007:

2007年,上海黄金交易所黄金出库量363.194 吨,即我国当年的黄金需求量,比2006年增长了48.02%,低于供给增长率8.82个百分点。

In 2007, the amount of gold withdrawn from the vaults of the Shanghai Gold Exchange, gold demand of that year, was 363.194 tonnes of gold, compared to 2006 increased by 48.02 percent, 8.82 percentage points lower than the growth rate of supply.

Regular readers of my research are familiar with the equation:

Import + Mine + Scrap = Total Supply = SGE Withdrawals = Wholesale Demand

In this post I will show/repeat two examples to proof this equation. Example one; this is a quote from the China Gold Market Report 2008:

Exhibit 4.
Exhibit 4.

For the sake of simplicity I left stock carry-over out of my equation. Second example; this is a screen shot from the China Gold Market Report 2010:

Exhibit 5.
Exhibit 5.

It states domestic mining output in 2010 was 340.88 metric tonnes, 40.72 % of total supply, net import (others) was 240 tonnes and total supply was 837.20.

Now let’s have a look at SGE withdrawals in 2010. From The SGE Annual Report 2010:

Exhibit 6.
Exhibit 6.

Exactly 837.2 metric tonnes. Last but not least, total demand as disclosed by the China Gold Market Report 2010:

Exhibit 7.
Exhibit 7.

Also 837.2 metric tonnes! We know this 100 % match has occurred from 2007 to 2011 by reading the reports from those years. There are no signs SGE withdrawals stopped matching total supply and demand ever since. In 2013 total SGE withdrawals accounted for 2197 metric tonnes (boxed in red, Kg – 本年累计交割量)

Exhibit 8
Exhibit 8

My point being, I think all this clearly exposes Chinese domestic mine supply is being sold through the SGE, not to the PBOC. Does the PBOC purchase gold on the SGE? I don’t think so because all physical gold on the SGE is quoted in RMB and, again, it wouldn’t fit the PBOC’s objectives mentioned above to exchange RMB for gold. On top of that I have several sources in the mainland, including a teacher in economics and the gold market at the Henan University of Economics and Law in Zhengzhou City, that all tell me the PBOC would never buy gold on the SGE.

Commercial banks like ICBC do offer a few trading products in USD, but these do not incorporate physical delivery/withdrawal. These products merely offer Chinese citizens and businesses more trading flexibility.

Exhibit 9. From the ICBC website about USD precious metals account.
Exhibit 9. From the ICBC website about USD precious metals account.

The PBOC (or SAFE) is more likely to make gold purchases overseas in exchange for USD; this way they can fulfill all their objectives. It’s not hard for the PBOC to do this without the shipments showing up in global trade data.

UK customs (HMRC) recently wrote:

Exhibit 10.
Exhibit 10.

The UK net exported 1425 metric tonnes in 2013, most of which ended up in China. When looking at UK trade we should bear in mind these enormous amounts of gold exclude monetary gold.

Exhibit 11.
Exhibit 11.

All data I gather from the SGE, UK customs, Switzerland customs and Hong Kong customs do not relate to any PBOC purchases (click here to see how much gold was exported from the UK, through Switzerland, through Hong Kong to the mainland in 2013). The amount of gold bought by Chinese consumers, investors and institutions I can make fairly good estimates for (it simply equals SGE withdrawals).

Exhibit 12.
Exhibit 12.

My estimates on PBOC official gold holdings are pure guessing, based on common sense and anecdotal stuff (though it doesn’t take a rocket scientist to know the PBOC has increased it gold holdings since 2009, when it was last updated to 1054 metric tonnes). More on that later.

SGE Vaults

In Macleod’s article there is much emphasis on SGE vaulting, though to my knowledge this amount is currently unknown. This is how the SGE works: SGE members make gold deposits, they sell this gold and the buyers have the option to withdraw the gold from the vaults. From the data I have we know yearly SGE deposits and withdrawals have been approximately the same from 2007 to 2011. Deposits can transcend withdrawals as some SGE account holders purchase Au (T+D) deferred contracts, perhaps later withdrawing the gold. Withdrawals can transcend deposits because there can be stock carry-over from previous years (see exhibit 4).

Exhibit 12.
Exhibit 12.
Exhibit 13.
Exhibit 13.

The SGE does not own its own vaults. There are merely SGE designated vaults owned by, for example, commercial banks. Needless to say, SGE withdrawal data relates to physical gold that leaves SGE designated vaults.

The next table is from Macleod’s article.

Exhibit 14. Screen shot from Macleod’s article. Coloured boxes have been added by me.
Exhibit 14. Screen shot from Macleod’s article. Coloured boxes have been added by me.

First of all he mixes deposit and withdrawal numbers and presents these as vaulted gold numbers (blue boxed numbers are deposits, orange boxed numbers withdrawals). Compare the numbers in the top row with exhibit 13 (and 4, 6, 8, 12 and this). In 2013 the 2197 tonnes were not vaulted, they were withdrawn! One more exhibit from the China Gold Market Report 2008:

Exhibit 15. At the end of 2008 SGE inventory was increased by 8 metric tonnes.
Exhibit 15. At the end of 2008 SGE inventory was increased by 8 metric tonnes.

According to my analysis Macleod’s vaulted numbers are false and thereby his vaulted gold increase numbers, as presented as demand in the following table I took from his article.

Exhibit 16. Screen shot taken from Macleod’s article.
Exhibit 16. Screen shot taken from Macleod’s article.

Additionally he adds vaulted scrap and mine supply to Chinese demand, while this is already included in SGE withdrawals (Exhibit 5, 6, 7, and this). This is double counting.

Hong Kong And Mainland Gold Trade

Exhibit 17.
Exhibit 17.

The amount of net exports from Hong Kong to the mainland is clear. Very little of the gold imported by Hong Kong from the mainland was bullion withdrawn from the SGE vaults.

A very long and complicated story short: In the mainland there are two types of trade; general trade and processing trade. General trade can be considered as normal trade. If gold is imported in general trade this is required to be sold through the Shanghai Gold Exchange. Only 12 banks have general trade licenses from the PBOC, though for every shipment they need anew approval.

1. Industrial and Commercial Bank of China
2. Shenzhen Development Bank / Ping An Bank
3. Agricultural Bank of China
4. China Construction Bank
5. Bank of Communications
6. China Minsheng Bank
7. Bank of Shanghai
8. Industrial Bank
9. Bank of China
10. Everbright
11. HSBC
12. ANZ

It’s not likely the PBOC would approve bullion gold to be exported in general trade. Additionally there are a few jewelry companies that have PBOC licenses, but these also have to ask for permission for every trade they conduct. The PBOC has a very firm grip on gold trade.

Processing trade is something else. In this trade form raw materials from abroad are imported, processed into products and then these products are required to be exported again. This processing is usually done (there can be exceptions) in Customs Specially Supervised Areas, or CSSAs. Processing trade doesn’t require a permit from the PBOC, as the gold that is imported will be exported after being processed. To export gold from a CSSA to a non-CSSA (that’s the rest of the mainland) a PBOC license is required. An example for a processing trade would be; gold from Hong Kong is exported to Shenzhen (a CSSA just across the border from Hong Kong and well known for its vast jewelry fabrication industry), then the gold is fabricated into jewelry and imported back into Hong Kong. This trade would show up in Hong Kong’s customs report, but it would not affect Hong Kong net export to the mainland.

Exhibit 18.
Exhibit 18.

Processing trade explains the Hong Kong imports from the mainland. Most of the gold Hong Kong imports from the mainland is balanced by Hong Kong exports or re-exports to the mainland, as the PBOC is not likely to allow the mainland to export gold in general trade.

Macleod states correctly that Hong Kong gold re-exports to the mainland, gold that is virtually not processed in Hong Kong, are all 1 Kg bars refined overseas imported into Hong Kong and sent forward to the mainland. Regarding Hong Kong exports to the mainland, gold that is processed in Hong Kong, he states this refers mainly to jewelry fabricated in Hong Kong which is shipped to the mainland and sold directly without going through the SGE. I disagree:

1) There is no evidence for this. Just because the gold is declared in Hong Kong as export doesn’t say anything about its shape or form. There are many refineries in Hong Kong, all capable of casting 1 kg bars to export to the mainland. Hong Kong gold export to the mainland can also be 1 Kg bars destined for the SGE.

2) In China mainland there is a 22 % tax on jewelry (17 % VAT and 5 % consumption tax), these costs are added to the bullion and fabrication costs of the jewelry. This makes a 24 carat bracelet (most aunties buy 24 carat for investment purposes) of 100 grams much more expensive than the spot price of 100 grams of bullion on the SGE, which is free of VAT and consumption tax. Why would a Chinese jeweler fabricate its products in Hong Kong where wages are at least twice as high and then import them into the mainland? Assuming this company has a PBOC import license. It’s more likely Chinese jewelers buy bullion on the SGE in the mainland, the SGE has no vaults in Hong Kong, fabricate the jewelry and then sell it, all in the mainland.

Macleod adds Hong Kong gold exports to the mainland (211 metric tonnes in 2013) to Chinese demand, I don’t. Additionally he adds total Hong Kong net gold import (597 tonnes in 2013) to Chinese demand. I don’t.

Exhibit 19.
Exhibit 19.
Exhibit 20.
Exhibit 20.

We know some of the gold Hong Kong net imported in 2013 ended up in the hands of mainland citizens. Because in Hong Kong there is zero tax on jewelry, there are many mainland citizens making trips to Hong Kong to purchase jewlery and walk back across the border without being bothered by customs. It’s estimated half of the jewelry sold in Hong Kong is bought by mainland tourists.

Exhibit 21.
Exhibit 21.

There are also mainland citizen that purchase gold in Hong Kong and store it locally in safety deposit boxes at banks or private vaults. Unfortunately I don’t have any hard numbers on this hidden Chinese gold demand (yet). One could take half of the jewelry sales numbers from Hong Kong reported by the World Gold Council, but I have my reasons not to trust those numbers.

Hong Kong net imports can also be explained by the fact many gold brokers in the world offer vaulting services in Hong Kong (GoldSilver, GoldMoney, etc). In 2013 Malca-Amit Global Ltd opened a vault in Hong kong, with a capacity of 1000 metric tonnes, which can be used by investors worldwide. This is why Hong Kong net import isn’t solely Chinese demand.

My Estimate On Chinese Total Gold Reserves Held In The Mainland

Let’s put together some data and try to work out how much gold the Chinese people and the central bank have been accumulating in the past decades. In exhibit 5 we found a clue suggesting China has probably been a net importer since the nineties.

Exhibit 22.
Exhibit 22.

This means we don’t know how much of the gold China domestically mined prior to that period has been exported, but after, lets say, 1995 all domestic mining did not leave the mainland. My best estimate of how much gold was being held among the Chinese population in 1995 is 2500 tonnes, according to Albert Cheng from the World Gold Council (page 55). Starting from that year I will try to make a conservative estimate on how much gold the Chinese have been accumulating.

According to the PBOC their official reserves in 1995 accounted for 394 tonnes, Chinese mines produced 108 tonnes that year; our starting point is 3002 tonnes (2500 + 394 + 108) in 1995. Subsequently I added yearly domestic mining, cumulative, as the Chinese didn’t net export any gold since that year. In 2001 The PBOC announced their official reserves had increased to 500 tonnes and in 2003 they announced having 600 tonnes. Because the gold market wasn’t fully liberalized in those years I have subtracted these gains from cumulative domestic mining. Just to be on the conservative side, also because I have zero trade data from 1995-2001.

The official subsequent update to 1054 tonnes by the PBOC was in 2009, when the gold market was fully liberalized. This gain I didn’t subtract from cumulative domestic mining, as I believe this was imported monetary gold. The increase in PBOC holdings from here on is pure guessing, though I feel comfortable raising their holdings to 3500 tonnes in 2013.

Import I have calculated using Hong Kong net exports to the mainland (my data begins in 2001), net gold imports numbers disclosed by Chinese gold reports (2007-2011) and analysing SGE withdrawals (2007-2013), using the equation:

mine + scrap + import = SGE withdrawals

import = SGE withdrawals – scrap – mine

The end result is this:

Exhibit 23.
Exhibit 23.

The chart above I think is conservative as it excludes hidden demand on which I have no hard numbers (yet):

– Mainland tourist buying jewelry in Hong Kong and storing it locally or bringing it home.

– Potential gold smuggling via tunnels from Hong Kong into the mainland.

– Undeclared gold import by affluent Chinese circumventing all authorities (customs, SGE).

Taking this into account it’s safe to say there is now more than 14000 metric tonnes of gold in China mainland. Divided by 1.3 billion people that’s 10.7 grams of gold per capita.

In Gold We Trust

Koos Jansen
E-mail Koos Jansen on:

  • hAranldom

    This is DayStar (DS) with the Monday Harvey Report.

    News and Commentary

    Harvey: Gold had a stellar day up by $8.50. Silver was held in check
    again (up only 7 cents) and this is a true signal that the boys wish to
    whack our precious metals tomorrow. However this time they must be
    careful as gold has now gone into backwardation for the first three
    months and the 6 month out GOFO is very close to backwardation. It means
    that owners of gold do not wish to sell their physical today and buy a
    futures contract, even though they would obtain a sure profit for fear
    that in the future they are frightened that they would not get their
    metal back. It also means that London good delivery bars are scarce.
    Today,the front one month, two month and now 3 month GOFO rates went
    into backwardation with a negative GOFO, and to boot the rate on the 6
    month is also coming very close to negative values. It is signalling a
    lack of London good delivery bars that the criminal bankers use to
    attack gold and will be much harder for the bankers to raid. GLD: Gold
    had a gain of 1.8 tonnes of gold and stands at 806.22. SLV: Silver was
    unchanged at 10,228.97 tonnes.

    Chris Powell (GATA): John Ing says that China’s appetite for gold
    remains insatiable. Robert Fitzwilson says that there is great potential
    for turmoil in Saudi Arabia. Michael Pento says the big problem in U.S.
    markets isn’t the skimming done by high-frequency trading but the
    rigging of interest rates and equity prices accomplished by the Federal
    Reserve. Former Assistant U.S. Treasury Secretary Paul Craig Roberts
    says another problem with U.S. markets is that all financial regulatory
    agencies are corrupt. Acceptance by energy producers of currencies other
    than the U.S. dollar well might destroy the Federal Reserve’s ability
    to suppress the price of gold — former Assistant U.S. Treasury
    Secretary Paul Craig Roberts.

    Bill Holter (Miles Franklin): So far all of what Russia has done has
    been to take “the high ground” from an international perspective. They
    have not shed blood and not even shut off gas supplies due to non
    payment. They have however gotten exactly what they have desired…to be
    shut out of using dollars. You must ask yourself whether or not if the
    Saudis feel the same way? Are they happy with a deal that was struck
    over 40 years ago? Is it still a fair deal to all parties involved? Let
    me leave you with these thoughts. As I have maintained, we will have a
    “reset” of “values” one way or another. The reset will more than likely
    be preceded by some sort of bank holiday, shutdown or whatever you’d
    like to call it but the important thing is that everyone will be
    “locked” into place with whatever they are holding. In Russia’s case,
    they will emerge from the reset with the ability to provide oil and gas
    and get paid in whatever the new “currencies” happen to be. They WILL
    get paid…and they will get paid in something more to their liking. Mr.
    Putin is merely giving this process a little “push” by having sanctions
    “placed” on him.

    Chris Powell on gold’s likely movement: The Tocqueville Gold Fund’s
    John Hathaway makes a comprehensive case for higher gold prices. “No
    mining company management in its right mind would commit to a program of
    mine construction at current prices,” Hathaway writes. “Therefore, we
    believe that mine supply will shrink in the years ahead, especially
    after 2015. Given the lead times involved in new mine construction and
    even with a moderately rising trend in gold prices, supply could be
    constrained through the end of the current decade. The demand picture,
    especially from Asian consumers and possible central banks, looks
    robust. The flow of gold into China continues to set records and the
    all-important consumption by the Indian subcontinent remains solid. The
    Chinese government, acutely aware to the downside risks of its $4
    trillion exposure to the U.S. currency, has almost certainly been
    surreptitiously accumulating physical gold as a hedge. There has been no
    update from official sources on central bank holdings since 2009, and
    if China is still in an accumulation mode, one can be certain that they
    have taken full advantage of the two year price decline and that their
    future intentions remain a well-guarded secret.” Hathaway covers market
    manipulation as well: “We believe that the architecture of the gold
    market is set to undergo significant change in the current year and that
    these changes, which have little to do with macroeconomic
    considerations, will result in attracting capital flows. These changes
    begin with inquiries by regulatory authorities in Germany and the United
    Kingdom into possible price manipulation by bullion banks in connection
    with the London fix mechanism for gold. These inquiries have been
    followed by lawsuits seeking damages for plaintiffs possibly injured by
    price manipulation. We believe many other lawsuits could follow.”

    Tyler Durden: The silence is deafening still about the ongoing
    collapse in the Baltic Dry Index among mainstream media types (as it
    just might challenge the hope/hype that growth is coming back). At the
    dismal level of 1002, BDIY is at 8-month lows and has fallen 14 days in a
    row… but now it is having a real world impact. As Sea News reports,
    Korean shipping companies are failing to place orders for large vessels
    and anxiety over the future is forcing some local companies to dispose
    of their assets despite the relatively low shipbuilding costs as of
    late. The Baltic Dry is down 14 days in a row at $1002 – its lowest in 8
    months (and worst start to a year on record).

    Tyler Durden: Ever since Goldman’s anti-HFT Op-Ed less than a month
    ago, and since the even more recent full-hearted support by Goldman of
    Michael Lewis’ most recent entry into the anti-HFT crusade (one
    promoting the Goldman-supported IEX exchange), one thing has been clear:
    the days of market structure in its current format are numbered. This
    was further confirmed after Goldman exited both its legacy Spear Leeds
    & Kellogg designated market making post at the NYSE, and is said to
    be winding down its market-dominating dark pool, Sigma X. It also means
    that our 5 year crusade against HFT – not because we want it replaced
    with a different, Goldman-backed exchange but because HFTs inherently
    destabilize the market (see May 2010 and the now daily flash crash in
    individual stocks and/or exchanges) – and specifically those most
    profitable but also most parasitic and predatory HFT strategies is
    coming to an end, with both the DOJ, FBI and SEC finally paying
    attention. DS: If Goldman got out of these profit
    centers and the regulators are now paying attention to those very things
    Goldman was doing, then you can be sure this was all planned. If it was
    planned, then we must be looking at a planned takedown of the global
    economy, for if they stop those illegal things that are keeping the
    market levitated, it won’t levitate any more.

    Zero Hedge: One look at the level of Citigroup stock pre-open and one
    could get the impression that the bank had a whopper of a result. And,
    on the surface at least, it did, after it reported $1.30 in EPS, beating
    the $1.14 expected and revenues of $20.1 billion also beating the $19.4
    billion expected if still a modest decline from the comparable result a
    year ago. What was not emphasized is that the bulk of the revenue, and
    thus earnings, upside was courtesy of the insolvent and bailed out Citi
    Holdings, where the top line increased by 58% from $914MM to $1.442Bn
    and the Net Loss shrank from $0.8 billion to $0.3 billion, while
    Citicorp – the main operating subsidiary – saw revenues decline by 5%
    from $19.7 billion to $18.7 billion, as Net Income dropped by 8% from
    $4.8 Billion to $4.4 billion.

    Tyler Durden on housing loans: The amount of Citigroup mortgage
    originations – that key aspect of the trumpeted “housing market
    recovery” – did what it has done at every other bank. It plunged. Only
    at Citigroup, it plunged so badly, it just reached a new record low
    which at $5.2 billion is a 71% drop from a year ago! Long live the
    housing recovery… in which nobody seems to be participating. And
    speaking of loan creation, based on reported data, so far in Q1, three
    of the four big banks: Citi, Wells and JPM have reported that total loan
    issuance is negative, something which drastically differs from what the
    Fed reports in its weekly commercial bank update report. DS: This
    is the old Rothschild modus operandi: loosen credit and let everyone
    get in debt up to their gills, then tighten credit and end up owner of
    the collateral for free (to the banks) fiat money. They are doing it yet
    again on a global scale.

    Greg Hunter (USAWatchdog.com): Real estate expert Fabian Calvo thinks
    the recent standoff between the Bureau of Land Management (BLM) and
    Nevada cattle rancher Cliven Bundy is about much more than grazing
    rights. Even though this standoff is over, we find out It’s really about
    sweetheart deals for federal land. Calvo says, “The hair on the back of
    my neck stood up when I was doing research for this and speaking to
    some of my contacts on Wall Street. The BLM is part of the Department of
    the Interior, and look at what they have been doing? Through the BLM,
    the Department of the Interior has been confiscating land and going
    after land, for example, in the high desert in California and all over
    the place. What I am hearing is they are categorizing this land for
    future collateralization or to sell off. In the Weimar (Germany)
    hyperinflation, after the hyperinflation, what did they back their
    currency with? They backed it with mortgages and they backed it with
    land. This is a total possibility here in America, but here’s the part
    that is more sinister and crazy. The Department of the Interior and BLM
    have been providing sweetheart deals for Chinese investors.


    Harvey’s comments on Monday price action (basis 1:30 PM EST)


    Gold closed up $8.50 at $1327.20 (Comex to Comex closing time).

    Silver was up 7 cents to $20.00.

    In the access market tonight at 5:15 PM:

    Gold: $1328.00

    Silver: $19.98

    Friday, Apr 11th Gold and Silver Action (basis 1:30 PM EST)


    Total, Apr (Gold), May (Silver), Jun (Gold) Open Interest

    In silver:


    The total silver Comex OI surprisingly rose by another 3366 contracts
    despite silver being down in price to the tune of 15 cents on Friday.
    The total OI now rests tonight at 165,569 contracts. (In oz that is
    represented by over 825 million oz which in turn equates to the entire
    global silver production).It is also surprising that we are nearing
    record levels of open interest happening at the same time as silver is
    down 61% from its all time high of $49.00 per oz. There is no doubt that
    some entity is trying to corner the silver Comex. They are patient
    waiting for their signal to take delivery on all of their silver longs
    that they have dutifully collected over the past 2 years. The April
    contract month saw it’s OI surprisingly fall by 20 contracts up to 20.
    We had 20 notices served upon Friday so in essence we neither gained nor
    lost any silver contracts that will stand for the April contract month.
    The big May contract month saw it’s OI fall by only 1,982 contracts
    down to 70837. We have a little over 2 weeks before first day notice and
    the OI for May is extremely high for this time in the delivery cycle.

    In Gold:


    The total gold Comex open interest fell today by 4,327 contracts from
    368,378 down to 364,041 with gold down by $1.40 on Friday. The big
    active contract month is April and here the OI fell by another 52
    contracts to 789. We had 46 contracts served on Friday, so we lost
    another 6 contracts or 600 additional oz that will not stand for the
    April contract month. The next non active delivery month is May and here
    the OI rose by 33 contracts up to 2,138. The next big active delivery
    month is June and here the OI fell by 5,053 contracts. The OI for June
    stands at 226,460.


    In Silver:


    The estimated volume today was fair 38,468 contracts. The confirmed
    volume yesterday was a monstrous at 55,640 contracts. You can see that
    silver is playing to quite a different audience than gold.contracts.

    In gold:


    The estimated volume today was pitiful at 96,782 contracts. The
    confirmed volume yesterday was slightly better at 100,809. The CME has
    scared away many of the gold traders.

    Inventory Numbers

    In Silver Inventory:


    Today, we had good activity inside the silver vaults

    We had 0 dealer deposits and 0 dealer withdrawals:

    Today dealer withdrawals: nil oz.

    Total dealer deposit: nil oz.

    We had 3 customer deposits:

    i) Into Delaware: 505,946.752 oz

    ii) Into CNT: 86,307.100 oz

    iii) Into Brinks: 4,962.70

    Total customer deposit: 597,216.552 oz.

    We had 3 customer withdrawals:

    i) Out of Delaware: 3054.646 oz

    ii) Out of Brinks 3054.646 oz

    iii) Out of Scotia: 600,149.150 oz.

    Total customer withdrawal: 607,136.036 oz.

    We had 0 adjustments:

    Registered (dealer) silver: 53.431 million oz

    Total of all silver: 177.163 million oz.

    In Gold Inventory:


    We had 0 dealer withdrawals.

    Total dealer withdrawals: nil oz.

    We had 2 customer deposits today

    i) Into HSBC: 32,060.14 oz

    ii) Into Scotia: 126,337.543 oz

    Total customer deposit: 158,397.683 oz

    We had nil customer withdrawals:

    total customer withdrawal: nil oz

    Today we had 0 adjustments

    Thus tonight, we have the following JPMorgan inventory levels in gold:

    JPM dealer inventory remains tonight at 317,060.418 oz or 9.861 tonnes.

    Today, 0 notices were issued from JPMorgan dealer account and 0
    notices were issued from JPMorgan’s client or customer account. The
    total of all issuance by all participants equates to 3 contracts of
    which 0 notices were stopped (received) by JPMorgan dealer and 2 notices
    stopped by JPMorgan customer account.

    The Total dealer Comex gold remains tonight at 803,808.511 oz or
    25.00 tonnes of gold. The total of all Comex gold (dealer and customer)
    rests at 7,917,941.645 oz or 246.28 tonnes.

    Tonight, we have dealer gold inventory for our 3 majorbullion banks
    (Scotia, HSBC and JPMorgan) with their gold inventory resting tonight at
    only 19.514 tonnes:

    i) Scotia: 157,966.367 oz or 4.913 tonnes

    ii) HSBC: 152,404,838 oz or 4.740 tonnes

    iii) JPMorgan: 317,060.418 oz or 9.861 tonnes

    Total: 19.514 tonnes

    Brinks dealer account, which did have the lion’s share of the dealer
    gold, saw its inventory level rises tonight to 152,591.089 oz or 4.746
    tonnes. Several months ago they had over 13 tonnes of gold in its
    registered or dealer account.

    Delivery Notices

    In silver:


    The CME reported that we had 2 notices filed for 10,000 oz today.

    In gold:


    Today we had 3 notices served upon our longs for 300 oz of gold.

    Contracts Left To Be Delivered + Month-To-Date Summary

    In silver:

    For those that are interested in the alleged bullion in the vaults of Comex by date, you can see it here:


    In silver:


    To calculate what will stand for this non active delivery month of
    April , I take the number of contracts served for the entire month at
    513 x 5,000 oz per contract or 2,565,000 oz to which we add the
    difference between the OI standing for April (20) minus the number of
    contracts served today (2) x 5,000 oz.

    Thus in summary:

    513 contracts x 5000 oz per contract (served) or 2,565,000 oz + (20)
    OI standing for April – (2) number of notices filed today x 5000 oz =
    2,655,000 oz. This is rather large for a non active delivery month.

    We neither gained nor lost any silver ounces today for the April silver contract month.

    In gold:


    In order to calculate what will be standing for delivery in April, I
    take the number of contracts served so far this month at 4472 x 100 oz =
    447,200 oz and add the difference between the number of OI for the
    front month (789) minus the number of notices filed today (3)

    OI Summary:

    4472 notices x 100 oz per contracts already served this April month
    or 447,200 oz + (789) the OI for the front April month – the number of
    notices served today (3) x 100 oz = 525,800 oz, the number of oz
    standing for the April contract month (16.35 tonnes). We lost 600 oz of
    gold that will not stand in the April contract gold month.

    Dealer Inventory Summary:

    i) The total dealer inventory of gold settles tonight at a level of 25.000 tonnes.

    i) a) JPMorgan’s customer inventory rests tonight at 1,030,042.709 (32.04 tonnes).

    ii b) JPMorgan’s dealer account rests tonight at 317,060.418 oz (9.861 tonnes).

    iii) The 3 major bullion banks (JPMorgan, HSBC, and Scotia) have
    collectively only 19.514 tonnes of gold left in their dealer account,
    and what is totally remarkable is the fact that little gold entered the
    dealer Comex vaults despite December and February and now April are the
    busiest months for the gold calendar. Another oddity is that the only
    gold that does enter the customer account are kilobars and kilobars are
    generally of demand from Eastern persuasion.

    Select Commodity Prices

    The Bloomberg Baltic Dry Index (BDI) was 1,002.00, down 2.62%. WTI
    May crude was 103.44 down 0.30. Brent crude was 108.92 up 1.59. The
    spread between Brent and WTI was 5.48 up 1.89. The 30 year US Treasury
    bond was up 0.0000 at 3.4800. The 10 year T-Note was up 0.0200 at
    2.6400. The dollar was up 0.29 at 79.78. The PPT/Dow was 16173.24 up
    146.49. Silver closed at 19.97 up 0.01. The GSR was 66.4296 up 0.3775 oz
    of silver per oz of gold. CIA’s Facebook was 58.89 up 0.36 (0.62%). May
    wheat was up 18.50 at 678.750. May corn was up 4.50 at 503.00. June
    lean hogs were up 1.425 at 122.650. May feeder cattle were up 0.350 at
    180.425. May copper was up 0.006 at 3.048. May natural gas was down
    0.060 at 4.560. June coal was up 0.17 at 60.70.

    Thank you for reading the Harvey Report!

    There is much more on Harvey’s blog http://harveyorgan.blogspot.com.

    Goooood day!


  • willem middelkoop

    Great reporting

    • JerseyJoe


  • Jeffrey

    Yes, great job, but I think that the numbers are somewhere in between. Based on my calculations I estimate the PBOC has 4471 tons as of Dec 31st, 2013 and will have 5823 tons as of Dec 31st, 2014. I am basing this on SGE cummulative withdrawals from 2002 to 2008, which equals 1793 and reported reserves in April 2009 of 1054 tons. 1054/1793 = 58.78%, estimating the PBOC has maintained purchases and they are buying gold at the same rate the Chinese people are we can estimate the reserves by simple math.
    Cummulative SGE withdrawals 2009 thru 2013 = 5814 + 1793 (cummulative w/d´s 2002-2008) = 7607 total SGE withdrawals. Estimating that PBOC gold reserves are the same percentage as cummulative SGE withdrawals. 7607 x 58.78% = 4471 gold reserves as of Dec 31st.
    Estimating 2300 tons of SGE withdrawals this year based on current withdrawals year to date gives us a cummulative year end 2014 SGE withdrawals of 9907 tons (2002-2014) x 58.78 = 5823 tons of Gold reserves for Dec 31st, 2014.

    • In Gold We Trust

      Thanks for sharing your analysis. I don’t think 2014 withdrawals will reach 2300 mt.

      • Jeffrey

        Koos you are welcome, maybe it will maybe it wont. Koos, the SGE withdrawals are trending ahead of last year so far! Even if SGE withdrawals are half that this year, that would put gold reserves based on my estimates at well over 5000 tons by year end! These are very realistic numbers. I understand you are conservative, but even you stated, that your numbers do not include the use of the military and other ways to bring Gold in!

        • Reymidas Fund

          they are all jealous and using your best guess to drive their own jump to fame.
          this is a good job.best regards

          • Jeffrey

            Thank you Reymidas Fund! You are right!

      • milla

        A little meaning

  • otoman

    Direct Quote: “Chinese law dictates all domestic gold mining output is required to be sold through the SGE..” The SGE, if I am not mistaken, is a govt. organization. This law more than likely applies to the sales made to the private sector person in China, and other outside sales. This law does not necessarily dictate that the Chinese Feds, being the PBOC, must purchase gold from itself, through the SGE. The PBOC would simply have the authority to take it. Communism, remember? Why else would the Chinese have such tight lips concerning their gold holdings. As does the infamous Feds, by their denial for an audit of Ft. Knox. If the Chinese govt. is dumping dollars (to rid themselves of unwanted diluted dollars) to buy gold, why would they sell gold outside of China since gold would bring them more dollars that they are trying to dump. They also could be using their own gold to buy oil from some countries that are now demanding payment for oil in gold; no longer U.S. dollars.

  • Jeffrey

    Reymidas Fund, yes, thanks again! I felt that Koos missed the point! Koos I felt you missed the point, I am using your numbers and coming up with 2300 tons this year which is totally in-line from what I have learned from you! Who cares if it is 2300 or not, and that is how you ended your comments when SGE w/d´s are already 585 for this year? I thought we were all on the same team, doing our best to read thru the lines to do the best we can! What gets me the most is these money printers and derivative gamblers have lost respect for what real work is and the immense work it takes to find and mine for gold or work for a living!

  • Piripi

    “… it’s safe to say there is now more than 14000 metric tonnes of gold in China mainland. Divided by 1.3 billion people that’s 10.7 grams of gold per capita.”

    Your estimate of gold in mainland China is a little at odds with the quantity inferred by Sun Zhaoxue, president of China National Gold Group Corp. (China’s largest gold producer by output), in comments quoted in the WSJ June 2013 (http://blogs.wsj.com/chinarealtime/2013/06/30/gold-standard-china-doesnt-set-it/) that the average Chinese person “only holds 4.5 gram of gold,” which he contrasted as being “… far below an average of 24 grams per person globally…”

    That global average accounts for all above ground gold stock in the world (world population: 7.097 billion x 24g = 170,328mt), so presumably the Chinese average accounts for all above ground gold stock in China (China population: 1.344 billion x 4.5g = 6,093mt).

    Obviously I have no idea from where he sources his data, but one would imagine him to be fairly proximate to the horse’s mouth (perhaps proximate enough for his claim of 4.5g/person in China to be state propaganda, who knows?).

    Just saying. This particular piece of Chinese data does not appear to support your conclusion.

    • In Gold We Trust

      Unfortunately Sun is not the president of the China Gold and the CGA any more. He got replaced last year. Just like Wang Zhe, former president of the SGE.

      In the grams p/c discussion many ways of calculating are being used. I use TOTAL, non-government and official, reserves (all my own estimates).

      For example here only official reserves are used:


      If you analyze, as I just did above, CN must hold more than 6093 mt in TOTAL reserves.

      Only in 1995 they held 3000 mt in TOTAL reserves, for a fact.

      • Piripi

        Sun Zhaoxue’s “24 grams per person globally” does account for TOTAL above ground gold, so, on this basis, it does not seem unreasonable to assume that the 4.5g he reports the average Chinese person as holding would be an apples with apples comparison, and thus be indicative of the TOTAL inside China.

        I’m not faulting your analysis Koos, just drawing attention to the comments of a source I believe you have quoted yourself in the past.

        • In Gold We Trust

          Yes, Sun has been a great source of information, the translations of his articles have been essential for my understanding of the Chinese gold market. However, now I have bumped into new evidence, I disagree with his 4.5g p/c.

          More important, I don’t think we can ever know for sure how much gold anyone (or country) anywhere truly holds. We can only make our best estimates.

          “The amount of above ground gold and its allocation is as invisible as the hand that’s regulates the free-market”.

  • Skeptical Investor

    I suggest that you consider a possible change in your argument that the PBOC has no motivation to purchase gold that is already in China. China’s balance of trade is approximately neutral in recent times, so the net new accumulation of US dollars by the PBOC is relatively unimportant. Nevertheless, it is clearly a goal of the PBOC to convert its existing dollar holdings to gold where possible. One method of achieving this would be to purchase gold from Chinese holders of the metal and to pay for the purchase in dollars. The Chinese holders in this case could be gold mining companies, but could also be other non-PBOC entities in China that have gold holdings that they acquired through the SGE. Since essentially all large Chinese companies import goods from outside China and need to pay for the imports in dollars, the dollars that they acquire from the PBOC in this way would have ready use. They could be motivated to participate in this process by any modest profit, convenience, or good will associated with their actions. The end result is that the PBOC acquires additional gold for their dollars beyond that obtained through purchases with counter parties outside China. The gold acquired in this way would also be indistinguishable from gold that appeared to be held in China but outside the PBOC.

  • Kirill Klip

    UBS: If The Referendum Passes Swiss Bank Would Have To Buy About 1,500 t of Gold over 3 years.

    It is the very good speech, but the most significant here is the place where it is happening: Swiss Parliament. It could be very much the beginning of the global reset.

    And who is buying Gold now:


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