Koos Jansen
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Koos Jansen
Posted on 17 Jan 2014 by

Spectacular Gold Demand (79 Tons) on SGE in Week 2, 2014

In the second weekly report, that covers the five trading days from 6-1-2014 to 10-1-2014, today released by the Shanghai Gold Exchange we can read a spectacular amount of physical gold has been withdrawn from the vaults; 79 tons. Last week I wrote withdrawals were down, but could well pick up this month as China will celebrate Chinese new year on January 31, 2014 according to the Chinese Lunar calendar. And withdrawals did pick up..

This type of demand puts the physical gold market under severe stress, hence the scramble for gold in London a few days ago. “There is a shortage of big bars, especially good-delivery 400-ounce bars”, said Bernard Dahdah from Natixis “One part of the problem is that large quantities of these bars that have come from ETFs, have now been moved to be re-refined into three-nines bars of smaller sizes and are therefore no longer available to the London market.”  The 1 month Gold Forward Offered Rate has been negative throughout the entire week Chinese demand was this strong. Until January 31 demand for physical could remain elevated, after which it will likely return to its average strong levels.

Next to insatiable physical gold demand from China, these are interesting times in the gold market as the German Federal Financial Supervisory Authority, Bafin, made allegations at banks saying “possible manipulation of currency rates and prices for precious metals is worse than the Libor-rigging scandal“, on January 17. The Financial Times reported in December, citing sources, that Bafin demanded documents from Deutsche Bank as part of a probe into suspected manipulation by banks of benchmark gold and silver prices. Maybe it’s not a coincidence that Deutsche Bank, one of five banks involved in setting these benchmark gold and silver prices, stated today that they will stop participating.


Overview Shanghai Gold Exchange data 2014 week 2

– 79 metric tonnes withdrawn in week 2, 6-01-2014/10-01-2014
– w/w  + 120.9 %, y/y + 49 %
– 99 metric tonnes withdrawn year to date

Source: SGE, USGS

My research indicates that SGE withdrawals equal total Chinese gold demand. For more information read thisthisthis and this.

SGE withdrawals 2014 week 2

This is a screen dump from Chinese SGE trade report; the second number from the left (本周交割量) is weekly gold withdrawn from the vault, the second number from the right (累计交割量) is the total YTD.

SGE withdrawals 2014 week 2

This chart shows SGE gold premiums based on data from the Chinese SGE weekly reports (it’s the difference between the SGE gold price in yuan and the international gold price in yuan).

SGE premiums 2014 week 2

Below is a screen dump 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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  • rowingboat

    good to see premiums falling despite the latest surge in deliveries, a result of three more banks being granted import licenses late last year I suggest:

  • Bill197511

    I hate to say it, but if we have economic warfare with China, they will kick our asses. We could still beat them militarily, but only for another few (or less) years.

    • In Gold We Trust

      The US and (inter alia) China have been in a financial warfare for many years now. The US still has the best weapons, but China is catching up quickly.

      • Bill197511

        China has bought a lot of gold the past couple of years. The sources of some of the gold are unaccounted for. I wonder how much gold the US has left. 7 years to return 300 tons of Germany’s own gold? The only reason gold is this cheap is due to massive Fed backed naked short sales. The Fed really shot itself in the foot, but Ben the beard says he doesn’t understand the gold market. What a bunch of buffoons.

    • lorkoos

      In a drawn-out conventional war, China could kick our asses right now. The USA won WWII in a large part by out-manufacturing the Germans… guess who’s the manufacturing king now?

      • Bill197511

        Excellent point, and you’re right. I fear though, that if two nuclear powers go at it, it will go nuclear. I think we would beat them now, but five years from now I’m not so sure.

        • Grée Solitaire

          No, China wants Taïwan and China Sea …. For now !
          Why would China break the back of its biggest clients ? All is manufactured there ! USA and Europe and Russia, where fool enough to let this happen … IF and only IF, in twenty years, the chinese manage to have a inner richness of its own “bourgeois” population, with “residence secondaire” and tuti quanti, will we have to be afraid of a war, or a sort of “locust invasion”.
          A tiny example : the way the “Occident (USA, Europe, Russia)” let bug countries like Qatar, and Emirats, get into our economies by the banking business’, and eat us within by terrorism – or the threat of it !

      • Kent

        Ah I would like to inform you that it was Russia and not the US that was is the prime lead in the breaking of the Nazi regime. The Russians broke the back of Hitler at the Battle of Stalingrad and finished him off at the Battle of Kursk. This was in 1943. We the West weren’t even in the land battle until the Normandy landings June 6 1944.

  • 24 carat

    First Rothschild left the London gold fix in 2004 when the goldprice accelerated to its intermediary high in 2011. Maybe they knew that a new freegold era had started with the birth of the euro and that heavyweight freegold advocates (China/Russia/etc) were embracing the concept. And that the Zoellick Gold Reference Point (pseudo goldstandard) was going to be internationally accepted.
    Deutsche Bank & C° have (again) been fasifying the goldprice benchmark to the profit of the priviliged in the financial industry !
    The comex inventory show (eligible & registered gold) is circumstantial evidence of an inner treadmill goldprice manipulation. Contract gold that circulates around the moneymasters (cartel).
    The only way out of this papergold hell is the continued accumulation of physical gold by those who want to break this inferno.
    In the mean time, the declining Western economies diverge further and further from their own repressive financial industry manias. That will break the back of the manipulative mismanagement of the financial and monetary affairs.

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