Tag Archives: China Gold Association

China Gold Association: 2013 Gold Demand 2199t

We now have official confirmation from the China Gold Association (CGA) that Chinese wholesale gold demand in 2013 reached 2,200 tonnes, in contrast to what all Western consultancy firms and news outlets have been reporting. On September 11 the China Gold Yearbook 2014 (that covers the financial year 2013) was released by the CGA on the China Gold Congress in Beijing.

As you can read below in the translation from a Chinese press release about the China Gold Yearbook 2014, the CGA states Chinese wholesale gold demand in 2013 was 2,199 tonnes; bullion import 1507 tonnes, doré import from overseas mines 17 tonnes and domestically mined gold accounted for 428 tonnes. (scrap supply must have been 247 tonnes)

Why the Western media don’t report on these numbers is “a mystery”. Remember the 1,500 tonnes net imported in 2013 by China exclude PBOC purchases!

China Gold Congress in Beijing 2014
Impression China Gold Congress Beijing 2014.

This was the setup of the China Gold Congress Beijing 2014.

  • Hosted by: the China Gold Association (CGA) and the World Gold Council (WGC).
  • Supporters: the People’s Bank Of China (PBOC), and more.
  • Strategy Partners: the Shanghai Gold Exchange (SGE), the Shanghai Futures Exchange (SHFE), Industrial and Commercial Bank of China (ICBC).
  • Media partners: Reuters, and more.
  • Cooperate Partners: CPM Group, and more.

At 16:00 GMT+8, on September 11, 2014, the China Gold Yearbook 2014 was presented on stage by the CGA.


Too bad the Western media didn’t catch the content of this report, luckily the Chinese press did notice it.

The information the CGA publishes in English about Chinese non-government gold demand, 1,176 tonnes in 2013, severely understates true non-government gold demand, 2,199 tonnes in 2013, which is only disclosed by the CGA in the China Gold Yearbook 2014 exclusively published in Mandarin hard copies.

Cover China Gold Yearbook 2014 (yes I own a copy)
Cover China Gold Yearbook 2014 (yes, I own a hard copy)

This data is not a secret, yet the Chinese have been trying to hide it as much as possible and it looks like either they’re being helped by Western institutions, or these institutions are ignorant.

All Western institutions and press that attended the China Gold Congress have Chinese employees who can perfectly read the China Gold Yearbook 2014. Like I said, why these institutions don’t publish true non-government Chinese gold demand is “a mystery”. I can tell you this though, 99.99 % of the global financial industry uses the Chinese demand numbers from the WGC, which state 2013 demand was 1066 tonnes. From an investment point of view this can give you an advantage.

As always you have to make up your own mind, in this case on Chinese gold demand. Who do you believe? The WGC? Or the China Gold Yearbook 2014 that states total demand was 2,199 tonnes – data that has been confirmed numerous times by the SGE (as I’ve written here and here)?

Every institution or analyst around the world might use a different metric to measure Chinese gold demand, for me the most import facts that stand out are: China net imported more than 1500 tonnes of gold in 2013, mostly 1 Kg bars which we can trace back to Switzerland and the UK, domestic mining production accounted for 428 tonnes, which didn’t leave the mainland as bullion export is prohibited, and all this gold met non-government demand. Additionally, it’s very likely the PBOC imported another few hundred tonnes on top of the 1500 tonnes. Consider this, from The Death Of Money by James Rickards:

A senior manager of G4S, one of the world’s leading secure logistics firms, recently revealed to a gold industry executive that he had personally transported gold into China by land through central Asian mountain passes at the head of a column of People’s Liberation Army tanks and armored transport vehicles. This gold was in the form of the 400-ounce “good delivery” bars favored by central banks rather than the smaller one-kilo bars imported through regular channels and favored by retail investors.

Now please read the translation by my friend Soh Tiong Hum of the Chinese press release on the China Gold Yearbook 2014:

China Becomes World’s Largest Gold Importer At 1507 MT In 2013

September 11 , 2014

Source: China News Network

China News Network, September 11 (Reporter Liu Yuying) – Chinese Gold Yearbook 2014 released by China Gold Association on September 11 shows that in 2013, Chinese gold import grew 197.98%, to 1506.5 tonnes, thereby becoming the world’s largest gold importer. 

According to the Almanac, 2013 continues 11 years of growth in China’s gold demand with substantial increase in market volume by 92.65 %. Breaking gold demand of 2012 above 1,000 tonnes, gold demand reached 2198.84 tonnes in 2013, of which consumption increased by 41.36%, consumption volume exceeded 1,000 tons, surpassing India to become the world’s largest gold consumer. Based on this number, net investment is deduced to be 1022.44 tonnes, a substantial increase of 230.68 %.

Over the same period, China’s gold production was 445.4 tonnes. 428.16 tonnes came from domestic sources while 17.25 tonnes came from offshore. 

The 2014 almanac says that the increase in Chinese gold demand in 2013 was mainly investment demand, 80% of growth in gold demand came from growth in investment demand.

It is understood that China’s gold supply and demand balance is mainly met through increased imports.

One form of supply is from import of offshore raw materials and finished domestically; the other is direct import of finished ingots.

Commentary in the Yearbook claimed that China’s 2013 gold import nearly doubling is a very big change that has never happened since the founding of China. The reason why China became a destination for foreign gold was mainly because of profit drivers, because there is a premium for RMB gold it is profitable to bring gold to China. As Chinese dependence on foreign gold resources increases, this reality also requires the gold market to open its doors to outsiders.

Chinese Gold Demand 418 Tonnes YTD, West Confused

Another week (24-02-2014/28-02-2014), another 49 mt of Chinese gold demand in the form of withdrawals from the Shanghai Gold Exchange vaults. Withdrawals year to date account for 418 mt. This brings February Chinese gold demand to 172 mt, down 30 % from an all-time 246 mt record in January. Let’s not talk about the COMEX.

SGE vs COMEX ™ Feb 2014

In the West there is still confusion about Chinese gold demand. News outlets and banks are trying to figure out how in 2013 China net imported 1158 mt through Hong Kong, plus a few hundred metric tonnes through other ports, mined 428 mt domestically, while demand according to the World Gold Council was just 1066 tons. The Financial Times and the Telegraph couldn’t explain it. February 27 Citibank came out with a report named “Chinese Gold Demand: Unraveling the Case of the Missing Gold”.

Citi Chinese gold demand 2013

Slide Citibank

In my opinion this analysis is actually a step in the right direction; Citi acknowledges Chinese supply and demand was 2200. In 2013 SGE withdrawals accounted for 2197 mt, these numbers are clearly related. The formula for the Chinese gold market is: total supply = mine + import + scrap = SGE withdrawals = total (wholesale) demand. Simply because of the structure of the Chinese gold market. However, this is where Citi and I split up. I called Citi and I spoke directly with the analyst from the report. What surprised me was that this gentleman had never heard of SGE withdrawals! Hence our dispute.

First let’s get their numbers straight. They don’t disclose all the numbers on the supply side, but I zoomed in on the chart and calculated the amounts by measuring how many pixels each bar counted, compared it to the scale etc..


Citi Chinese gold supply and demand

The outcome on the supply side is roughly: scrap 240 mt, gross import 1480 mt, mine 420 mt.

The demand side: consumption 1176 mt, gross export 373 mt, residual 640 mt.

1) Export is not demand

In the chart above gross import is in fact net import. Very little of the gold exported from the mainland to Hong Kong 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 11 banks have general trade licenses from the PBOC, though for every shipment they need anew approval. It’s not likely the PBOC would approve gold export in general trade.

Processing trade is something else. In this trade form raw materials from overseas are imported, processed into products and then these products are exported again. This processing can only be done in Customs Specially Supervised Area’s, or CSSA’s. Processing trade doesn’t require a permit from the PBOC, as the gold that is imported will be exported after being processed. An example for a processing trade would be; gold is imported in Shenzhen, fabricated into jewelry and then exported to Hong Kong. The trade would show up in Hong Kong’s customs report.

Pocessing trade

Why am I telling you this? Because the gold that in 2013 was exported from the mainland to Hong Kong was all processing trade and did never go through the SGE. Concluding 1480 mt was net imported and that residual demand was much more than 640 tons in 2013. This chart I published on February 19 (the “Difference” is actual residual, WGC demand is more or less the same as CGA consumption demand):

SGE withdrawals vs WGC

2) Residual demand is not jewelry stockpiling

According to Citi this is what residual demand is:

…This includes stockpiling (by commercial banks,jewelers, etc.) as well as direct investment consumption…

I asked the analyst from Citi about residual demand, he said they don’t really know so they came up with this explanation. As we can see in the chart above residual has been 2000 mt in the last seven years. Was this mostly commercial banks and jewelers stockpiling? Of course not. I can understand some jewelers added some gold to their inventory when prices dropped significantly, for example in April 2013, but this stockpiling analyses is untenable. Citi continues:

In 2014… the result should be another large increase in Chinese imports and another large “gap” in supply and demand data.

Another large gap in supply and demand? Really? When I called the SGE in November 2013 they told me this gap (some call it residual, some net investment) is just individual account holders at the SGE withdrawing physical gold from the vaults. So residual demand is just direct investment and we shouldn’t treat it as a demand category that is insignificant.


Overview Shanghai Gold Exchange data 2014 week 9

– 49 metric tonnes withdrawn in week 9  (24-02-2014/28-02-2014)

– w/w + 0.62 %

– 418 metric tonnes withdrawn year to date

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

SGE withdrawals 2014 week 9

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 9 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).

SGE premiums

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 2014-03-07 om 23.22.55

In Gold We Trust


The World Gold Council Clueless on Chinese Gold Demand?

February 18, 2014 the World Gold Council released the Gold Demand Trends for 2013. According to this report total 2013 Chinese consumer demand was 1,065.8 tons. In my opinion this number is highly disputable.

Chinese Gold Market Essentials

The Chinese gold market is completely structured top down. The main physical (spot and deferred) exchange in China is the Shanghai Gold Exchange (SGE), that serves as the entrance point for imported and mined gold to the Chinese marketplace. Additionally the SGE is supplied by recycled gold. The Shanghai Futures Exchange (SHFE) facilitates the trading of gold futures contracts (to compete with the pricing power of Western markets).

The reason the PBOC requires imported gold to be sold first through the SGE (mined and recycled gold are stimulated to be sold through the SGE by tax incentives) is to keep track of how much gold is added to non-government reserves (jewelry, bar hoarding, etc). The setup is quite simple; to channel import and mine supply through one exchange the PBOC can efficiently supervise the quality and quantity of the gold that enters the Chinese market place. The PBOC likes to knows how many grains of fine gold are being held among the people.

Before gold is allowed to enter the vaults of the SGE it’s assayed by the National Quality Supervision and Inspection Center for Bullion & Its Products that grants a minimum fineness of 99.95. Gold withdrawn from the SGE vaults can only re-enter as recycled gold. After being remelted, by one of the associated refineries (see the list on page 40), and an assaying process the gold can move back into the SGE vaults. Just to make sure on SGE level gold of the highest purity is traded.


The consequence/purpose of the structure of the Chinese gold market is that SGE withdrawals equal wholesale demand. Confirmed by the fact that total demand reported by the China Gold Market Reports 2007 – 2011 exactly equal SGE withdrawals for the corresponding years. For an extensive analysis read this.

The Great Disparity

In 2013 SGE withdrawals accounted for 2197 tons. The next screen dump is from the last SGE report of 2013, the second number from the right (red – 本年累计交割量) is the total amount of gold withdrawn from the SGE vaults in Kg.

SGE total withdrawals 2013

The World Gold Council (WGC) claims to report on ALL sorts of demand; consumer, investment, industrial and central bank demand. This is from their February 18, 2014 press release:

Global consumer demand for gold at unprecedented levels in 2013 China the world’s largest gold market in 2013 

Consumers around the world bought gold in record amounts in 2013, led by demand in China and India, with China becoming the world’s biggest gold market, according to the latest World Gold Council Gold Demand Trends report. …

In 2013 the gold market saw 21% growth in demand from consumers which contrasted with outflows of 881t from ETFs. The net result was that global gold demand in 2013 was 15% lower than in 2012, with a full year total of 3,756t. …

Central banks

Although down 32% on 2012 they continued to be strong buyers of gold, a trend which began in 2009. 2013 saw net purchases in all four quarters, totalling 369t, meaning 12 consecutive quarters of net inflows. …


Demand reached 405t in 2013, virtually unchanged from the figure of 407t in 2012.

We can see the WGC tracks consumer (jewelry, bar and coin), ETF (and thus investment funds), central bank and industrial demand. Logic, if one wants to thoroughly analyze the gold market all facets of supply and demand must be taken into account.

So how come there is such a big difference between Chinese demand reported by the WGC, 1066 tons, and wholesale demand, 2197 tons? Why is the WGC missing 1132 tons? One reason is because the Chinese are hiding it. Since 2008 the Chinese have great interest to hoard in the dark in order to diversify their US dollar reserves, strengthen their economy and protect it from external shocks. The China Gold Association (CGA) changed the way they measure demand and all other Chinese gold institutions ceased publishing reports on demand since 2011. The only valuable information they continue to publish are SGE withdrawals. Not often, but sometimes the facts seep through the Chinese press:

China’s explosion in demand for physical gold in 2013 left a deep impression on international investors. The Shanghai Gold Exchange withdrawals for the year up till 27 December 2013 exceeded 2180 tons. Considering the exchange’s position as a hub for domestic gold circulation, in conjunction with a system that forbids withdrawn gold from re-entering inventory, to a large extent the withdrawals number can be treated as the best benchmark for physical gold demand in the Chinese market.  Not to mention that the entire 2013 global mined gold production does not exceed 2700 tons. China’s massive demand has to a large extent remade the world’s gold circulation system. Newly mined and stocked gold is moving through trade links in London – Switzerland – Hong Kong – into China in a large scale orientation towards the East. The impact of China’s demand on international gold price will inevitably increase.

Why consumer demand as presented to the world has been understated since 2008 is because the China Gold Association is manipulating the demand category net investment to suppress other categories like jewelry and bar.  This is an overview from the China Gold Market Report 2010.

Chinese gold demand 2010

According to the China Gold Market Report 2007 net investment was 18 tons. Thomson Reuters GFMS (which is the sole data provider for the WGC), assumed this was gold added to the stocks of banks, jewelers and the mint, as it was withdrawn from the SGE vaults but wasn’t sold on retail level. In 2007 this was probably true. But when Lehman fell the world changed, the Chinese began to overstate net investment to hide true demand. Up until today GFMS states net investment is stock movement changeLet’s have a look at how much net investment was in recent years. Note, in the chart below the “Difference” is approximately net investment, calculated as SGE withdrawals minus WGC consumer demand minus industrial demand.

SGE withdrawals vs WGC

Actual net investment published by the China Gold Market Reports: 2007 – 18 tons, 2008 – 129 tons, 2009 – 147 tons, 2010 – 266 tons, 2011 – 285 tons.

From 2007 – 2013 net investment was roughly 2000 tons. This definitely can not have been stock movement change at banks, jewelers and the mint. According to my analysis this gold was bought at the SGE by investment funds, individual investors and jewelers pretending to be individual investors. In the mainland there is 17 % VAT on jewelry, plus an additional 5 % consumption tax – you do the math.

WGC gold

I contacted the WGC and got in touch with one of their experts based in China. When I asked him what net investment was we had a brief debate after which he had to admit he was clueless on where this gold was going. He told me the Chinese will never disclose this information. I asked him if he would like to collaborate with me to research net investment. I got no response. A week later I asked him if he would grant me permission to publish our email correspondence. He responded to not publish our correspondence as it was meant to be private.


In the meantime I was emailing a precious metals analyst from Thomson Reuters GFMS about the Turkish gold market. This gentleman was extremely kind and helpful and explained to me in detail how GFMS measures Turkish gold coin production. Very valuable information for me! When I asked him what his take was on Chinese net investment, I got no response.

CPM Group

Jeff Christian from CPM Group did respond after I wrote him an open letter regarding SGE withdrawals. You can read our debate in the comment section of this post. Not surprisingly we couldn’t agree. What was interesting about our conversation was that he said total Chinese net gold import in 2013 was 1411 tons.


Of course I’ve written a million emails to the CGA, in English and Chinese, no response whatsoever. I called them speaking English, no luck. My friend in the mainland has called them numerous times, they always say the gentleman who wrote the China Gold Market Reports is on holiday. The message is clear…

The mainland officially net imported 1158 tons of gold from Hong Kong in 2013. Total net import according to Jeffrey Christian was 1411 tons (according to me it was 2000 tons), let’s take his number for an example. How can China import 1411 tons and mine 428 tons (that’s 1839 tons) but only demand 1066 tons? Did they import gold without asking for it? Did someone secretly pushed it across the border and now the Chinese are stuck with it? Or is there a lot of demand the WGC doesn’t disclose?

Anyway, I think 1066 tons Chinese consumer demand as reported by the WGC is highly underestimated. To be continued…