Tag Archives: singapore

China’s Secret Gold Supplier Is Singapore

Since 2013 China continues to absorb physical gold from the rest of the world at a staggering pace. Worth noting is that gold imported into the Chinese domestic market  is not allowed to be returned in the foreseeable future. Because ownership and the disposition of these volumes of gold likely will be of great importance next time around the international monetary system is under stress, it’s well worth tracking China’s progress of imports – especially because the mainstream media and most consultancy firms are in denial of these events.

Click on this link for an in-depth analysis of the structure of the Chinese gold market.

Below we’ll discuss what countries supplied gold to China in 2017, Singapore’s role not only in 2017 but in the past few years, and physical flows through the vaults of the Shanghai Gold Exchange International Board in the Shanghai Free Trade Zone (SFTZ). We’ll see that Singapore has been a major gold supplier to China since 2013, which was previously not publicly known. In addition, my theory is that physical flows through the SFTZ have recently increased, signaling the slow birth of an international gold trading hub in Shanghai.

Most readers will be aware that the easiest way to gauge Chinese wholesale gold demand is by the amount of metal withdrawn from the vaults of Shanghai Gold Exchange (SGE). The problem is that withdrawals from the SGE Main Board in the domestic market and withdrawals from SGE International Board (SGEI) in the SFTZ are published as a single figure: SGE(I) withdrawals. Accordingly, SGE(I) withdrawals are a handsome indicator for physical turnover in China, but don’t inform us on the details of what unfolds in the domestic market separately from the SFTZ. Any metal in the SFTZ is allowed to be exported and thus part of the world’s floating supply. To get the best understanding of physical flows in and through China we have to study international merchandise trade statistics, and add a few other data points, before we can put all pieces together.

SGE(I) withdrawals in 2017 accounted for 2,030 tonnes, which was up 6 % from 2016; my (provisional) estimate of Chinese net gold import for 2017 is 1,082 tonnes, down 19 % from 2016; the China Gold Association has disclosed domestic mine production at 426 tonnes, which was 6 % less than the year before. Effectively, in 2017 SGE(I) withdrawals increased while imports and mine supply declined. Either there was an increase in recycled gold flowing through the Main Board, or more metal was withdrawn and exported from the International Board. Let’s have a closer look at Chinese imports and exports.

Chinese cross-border gold trade is notoriously difficult to measure as these numbers are omitted from China’s customs data. The best approach is to sum up all the flows of the countries that trade gold with China. Traditionally, Hong Kong has been the main conduit to the mainland. Not many years ago most analysts simply used Hong Kong net exports to China as a proxy for total Chinese imports. Since 2013, however, Hong Kong’s market share has steadily declined. In 2017 Hong Kong net exported 628 tonnes to China, which was about 58 % of what the mainland net absorbed.

The second largest net exporter to China in 2017 was Switzerland. The Swiss delivered (29 % of the cake at) 316 tonnes, nearly 30 % less than in 2016. Needless to say, Switzerland is one the largest gold trading hubs globally and gold moving from the Swiss refineries directly to the mainland is supplied from a host of other sources.

Direct gold export from Australia has been released up until June by free data provider COMTRADE. Though provisional, Australia’s shipments account for 20 tonnes (which is 40 tonnes annualized).

This is the first time that I report on Singapore’s gold trade data, despite Singapore’s significant growth in market share in recent years. When BullionStar first purchased trade statistics from Statlink Singapore in 2015, the data contained mismatches between the value and the weight reported, which made us unsure about the accuracy of the numbers. And hence we refrained from publishing them. However, these figures have now been revised and we can finally analyze what happened all the way back to 2013.

I’ll start by showing the previous mismatches and then explain what has changed. The numbers we got in 2015 disclosed that Singapore exported gold worth 108 million Singapore dollars (SGD) and weighing 101 tonnes to China in 2014. 108 million SGD translates into 85 million US dollars, which can be computed into 2 metric tonnes when divided by the annual average USD gold price. The mismatch between the value and weight reported was thus 99 tonnes (101 – 2 = 99).

Exhibit 1.

At free trade data provider COMTRADE the mismatch is still visible (late March 2018). About 85 million USD versus 101 metric tonnes. Mismatches of this magnitude render the data useless.

Although a report I got my hands on by the China Gold Association (CGA) disclosed China net imported 1,294 tonnes in 2014, and all data from gold exporters to China aggregated to 1,194 tonnes, I couldn’t proof how much came from Singapore.

Exhibit 2.

Thereby, the data from Singapore in no way matched with the data from, for example, Switzerland. What the Swiss reported to have sent to Singapore didn’t match what Singapore reported to have received from Switzerland. Several inquiries from BullionStar at Singapore Statlink produced no results.

Earlier this year (2018) I read a comment by Thomson Reuters GFMS on the physical gold flows through Singapore. The report mentioned elevated throughput, especially to China, so I decided to purchase the Statlink numbers once again. What I found is that they revised their gold trade numbers denominated in SGD (while the revised data doesn’t include weights). From the looks of it everything makes a lot more sense now. If we compare the revised gold trade data from Singapore with Switzerland now the match is as good as it gets.

Exhibit 3. Any relatively small mismatches can be explained by SGD exchange rates.

The revised data from Statlink with respect to Singapore’s exports to China looks reliable as well. When computing the tonnage from the SGD values, the new data suggests Singapore net exported 78 tonnes to China in 2014. When added to the net exports from other countries, the total (78 + 1,194 = 1,272 tonnes) comes close to what’s disclosed by the CGA as total imports (1,294 tonnes, exhibit 3). The residual gold can have been imported as a by-product in base metal ores and concentrates.

The revised numbers from Singapore shine a new light on Chinese imports. Tellingly, Singapore has been a massive exporter to China since 2013. According to Statlink, Singapore net exported 102 tonnes to China in 2017, a record year and up 177 % from 2016.

Exhibit 4.

Chinese domestic mine output (426 tonnes) plus net imports (1,082 tonnes) plus scrap (estimated at 233 tonnes) for 2017 nearly match SGE withdrawals, as can be seen in the chart below. My theory is that the remaining deficit – in the chart displayed by the difference in heights of the left and middle columns – is related to the surplus in 2016. Allow me to explain.

Exhibit 5. Scrap numbers are taken from GFMS.

One of the largest direct net exporters to China in 2014 and 2015 was the UK. Before that, the UK (LBMA) supplied gold to China only indirectly via Switzerland and Hong Kong. In April 2014 bullion banks commenced shipping bullion directly to China mainland, though in 2016 the flow not only stopped, it went into reverse. 2017 was the first year wherein China was a net exporter to London! No staggering numbers, but still, 11 tonnes were moved to the UK last year. To me this indicates activity at the SGEI.

Exhibit 6.

Because gold can only be exported from Free Tarde Zones in China my guess is that since 2016 inventory in SGEI vaults has mushroomed (exhibit 5). Subsequently, in 2017 metal has been withdrawn from SGEI vaults as demonstrated by, (i) net exports to the UK and, (ii) a deficit between SGE(I) withdrawals and total supply somewhat larger than in 2013, 2014 and 2015, but right after a supply surplus in 2016 (exhibit 5). I also don’t rule out China is exporting small tonnages from the SFTZ to countries in Asia, trades that might not show up in global customs data.

I’m not expecting any explosive exports from the SFTZ, as the premium in Shanghai over London is mostly positive so it makes sense to ship it from West to East, not the other way around. In the next chart by Goldchartrus.com we can see the end of day premiums which have been positive all through 2017 (needless to say, intraday discounts can have occurred).

Exhibit 7.

All in all, I would assess total Chinese gold demand in 2017 a tad lower than SGE(I) withdrawals, say at about at 2,000 tonnes, because there’s likely some inventory in the SFTZ. Although it’s unknown how much is in the SFTZ, my estimate for total above ground gold within the mainland stands at 21,021 tonnes as of December 31, 2017. This includes approximately 4,000 tonnes owned by the Chinese central bank. In this article I’ve demonstrated how I’ve computed these figures.

Exhibit 8.

Trading volume at the SGE(I) continues its steady growth. In 2017 total gold trading volume, including OTC trading, accounted for 27,145 metric tonnes, 12 % more than the year before.

Exhibit 9.

The launch of the SGEI in 2014 has greatly boosted total trading volume. Not because many foreigners are trading the International Board contracts, but because they choose to trade the Main Board contracts which are more liquid (foreigners are allowed to trade Main Board contracts but obviously are not allowed to withdraw metal from the vaults and/or export).

In the chart below you can view trading volume in the most popular International Board contract iAu99.99. Volume at the SGEI is not growing.


SGE Chairman: India Will Become SGE’s Largest Partner

The latest Indian Bullion Bulletin has just been released wherein the chairman of the Shanghai Gold Exchange (SGE) Xu Luode presents the SGE’s international ambitions – read below.

The Chinese government regards the gold market as an indispensable component of China’s financial market and attaches great importance to its growth and development.

The Shanghai International Gold Exchange

Xu provides an excellent all round update of the SGE, though he’s somewhat exaggerating the performances of the SGE International Board (SGEI) till thus far. I don’t blame him though, the SGEI has great potential.

One way to enhance SGEI trading would be to allow individual foreign investors to have easy access to the international exchange and its wide range of products, which is currently limited to SGEI members (banks, refineries, etc). Xu notes this will change soon.

I’ve gotten numerous questions by email from investors worldwide that would like to trade on the SGEI, but can’t get through. At this stage it’s simply not possible, but my contacts at ICBC will timely notify me when everybody can trade at the SGEI. I’ll keep you posted.

Governor of the central bank of China (PBOC) Zhou speaking at the opening of the Shanghai International Gold Exchange.

Xu Luode from the Bullion Bulletin:

Embrace Global Markets, Strengthen International Cooperation, Share China Opportunities, Advocate Mutual Benefits

Shanghai Gold Exchange, A Market-based and Global Exchange Center

Xu Luode, Chairman, Shanghai Gold Exchange

The Shanghai Gold Exchange (“Exchange” or “SGE”) was officially established on October 30, 2002 by the People’s Bank of China (“PBC”) under the approval of the State Council. In just little over a decade, the SGE has firmly placed itself as the most important domestic trading platform and central hub for spot and investment products in gold, silver and platinum. SGE’s success also extends to the international stage: it has been ranked as the world’s largest exchange for physical gold bullions for seven years in a row, and its trading volume in gold and silver reached 11.6 and 430.5 thousand metric tons respectively in 2013, which puts it as the fourth largest exchange in the world for gold and third largest in silver.

I. Background and Significance of the Launch of the International Board

The official launch of SGE’s International Board on September 18, 2014 has unveiled a new chapter in the reform and development of China’s gold market, and marked a solid step in the opening up of the China’s gold market to global investors. Its strategic launch underscores both SGE’s own development needs and its desire for greater integration with international markets. The background and significance of the International Board are:

Xu Luode 21. China has an enormous market base for gold products and harbors great potential.

In recent years, we have witnessed the trend of “oriental gold” playing an increasingly important role in the global market attributable to the rapid development of the China’s gold market: in 2013 alone, the gold produced and imported by China exceeded 50 percent of the world’s gold production and 60 percent of the world’s gold consumption, respectively. As the world’s biggest gold producer, consumer, and importer, China is gradually integrating itself into the global gold market. Meanwhile, China is still a relatively young market as compared to its more established siblings in the world; similarly, SGE has been operating for less than 12 years and is still in its early development stage. But the future is bright: as the urbanization spreads to far corners of China and national income level surges, the development and growth potential of the China’s gold market has never been stronger.

2. Chinese government has been a major proponent for advancing China’s gold market and ushering in its era of internationalization.

Chinese government regards the gold market as an indispensable component of China’s financial market and attaches great importance to its growth and development. PBC has laid a solid foundation for transforming it from a domestic commodity market based on spot products to an international investment market based on derivatives. On another front, the Chinese government established the Shanghai Pilot Free Trade Zone (“Shanghai FTZ”) in September 2013, signaling its determination to introduce more innovations and reforms to the domestic financial system. As national efforts to internationalize RMB reach their crescendo, China’s domestic gold market is facing an auspicious window and timing for pursuing its internationalization and greater openness.

The significance of the launch of the International Board is manifest in the following three aspects:

(1) The International Board provides a vital link between the domestic and international gold markets.

By inviting foreign investors to trade in China’s domestic market, the International Board has greatly expanded the size of the market and increased market liquidity. Foreign investors can take advantage of the diverse range of trading, pricing, and hedging instruments as well as the arbitrage opportunities of “RMB-denominated gold price, RMB interest rates, and RMB exchange rates” provides, and share in the benefits and wealth brought about by China’s market reforms and development.

(2) The International Board provides a new investment channel for offshore RMB.

The International Board offers an attractive investment channel for foreigners holding offshore RMB and imbues offshore RMB with greater investment value and liquidity than ever before. At the same time, the International Board has spurred innovations in FX and interest rate products, improved the visibility and standing of RMB as an international money of account and settlement currency, and accelerated RMB’s march to becoming an international currency.

(3) The International Board lends greater weight to the importance of Asian gold market on the international stage.

China, India, Dubai and Singapore all enjoy vibrant trading scenes and Asia gold 2comparative advantages; however, in the eyes of many investors, the influence wielded by the Asian markets is still very limited as a whole. Using the International Board as a launch pad, China’s gold market will embrace greater openness and foster stronger ties with its neighbors and, together, elevate the trading and pricing influence of Asia in the world’s gold market.

II. Key Features of the International Board

The launch of the International Board has attracted major spotlights from international markets due to its five prominent features:

1. Internationalization of market participants.

SGE’s first 40 highprofile international members include major global commercial banks, investment banks, gold refiners, and investment firms such as HSBC, Standard Chartered, Scotia Mocatta, Goldman Sachs, ANZ, Metalor, Heraeus and PAMP. International members are permitted to trade in all products listed on the Exchange through proprietary accounts and on behalf of international investors.

2. Internationalization of funds.

Offshore RMB and offshore convertible currencies can be used in the trading of RMB-quoted precious metals products offered by the Exchange via the PBC’s Free Trade Accounting Unit.

3. Internationalization of pricing.

All products listed on the Exchange are denominated in RMB. As more market participants gather to trade on the Exchange, and onshore investors and domestic funds become more intertwined with offshore investors and offshore funds, the sphere of influence of trading prices on the Exchange will gradually expand from nearby regions to the whole world and, at the same time, RMB-denominated gold benchmark price will emerge as another financial index of global significance.

4. Internationalization of products.

SGE integrates the Main Board with the International Board so that domestic and foreign investors can trade in the same arena. After being admitted to the Exchange, international investors are allowed to trade in a wide array of products, including the three spot gold products listed on the International Board as well as spot and deferred products on the Main Board. In addition, to better meet the needs of the market, the Exchange has further optimized the structure of products and recently introduced (T+N) deferred products as a new choice for the investors. SGE has also embedded bullion leasing service in its design of the International Board. SGE will concentrate on the launch of this service as its next step toward offering the full range of services that international investors demand.

5. Internationalization of delivery, storage and transportation services.

SGE provides delivery, storage, logistics and other supporting services for the importation and transit of gold through its fully modernized vault in the Shanghai FTZ that is capable of holding thousands of metric tons of gold. International investors may choose to conduct the delivery of physical gold at this vault at their own discretion. The physical gold so delivered may be imported into China by any qualified entity commissioned by the Exchange, or transited without restriction to any other country in the world.

III. Market Performance and Development Outlook of the International Board

As of November 2014, international members have traded more than 100 metric tons of gold in aggregate with a total turnover of around RMB 25 billion; imported gold tipped in at around 12 metric tons, and a total of 15 metric tons of gold have been deposited into the International Board Certified Vault. The market functions of the International Board are beginning to take root and contribute positively to the national economy. As is widely expected, the International Board has shown a promising start, but SGE’s internationalization initiative has just taken its first step, more efforts and time will be needed to realize the full market functions and economic impacts of the International Board.

1. Strengthen international cooperation and seek mutual benefits.

SGE and CME have recently signed a Memorandum of Understanding with regards to future cooperation efforts. As a perennial major consumer of gold and a close neighbor of China, India will undoubtedly become one of SGE’s most important partners in the coming years. SGE looks forward to forming close partnerships with the Indian market.

2. Attract more foreign entities and investors to participate.

At present, a large number of international organizations have expressed their strong desire to join in the SGE and the Exchange itself has started the admission process for a second group of international members. Looking ahead, SGE will continue to admit competitive foreign entities as its members in accordance with market needs, and will allow international members to conduct brokerage services when the time is ripe and accelerate the preparatory steps for the eventual admittance of foreign individual investors.

3. Further tap into market potentials and improve investor service.

In the future, the SGE will continue to optimize and enrich its range of bullion products, gradually open its silver, platinum, palladium and other precious metals products as well as price asking products and derivatives such as forwards and options to international investors. Furthermore, the SGE will focus on enhancing its transit and leasing businesses, gradually roll out foreign currency-based collateral services and FX swaps, accept offshore funds from more varied sources for International Board transactions, further improve the financial services offered to international members and customers in regards to account opening and cross-border funds transfers, provide customized and streamlined financial solutions to international members, and, by adopting a top-down design, offer exceptional and expedient services to international investors.


Mr. Xu Luode, Bachelor of Economics and senior accountant, is the Chairman of Shanghai Gold Exchange. He is also the Vice Chairman of China Gold Association, the Vice Chairman of China Payment and Settlement Association, the Executive Member of China Finance Society, and the Executive Member of China Numismatic Society.

Gold Is Money

Would you like to receive a percentage of your salary in gold? Yes I do!

I’m working for the first company in Singapore, BullionStar.com, that offers its employees to be paid in gold or silver. Any BullionStar employee – an economic agent that is free to choose to whatever he or she wishes to allot value –  can choose what percentage of its renumeration will be settled in bullion.

Of course, everyone working for any company can choose, once it has received its fiat salary, to exchange a percentage of the salary for gold. However, my employer facilitates the automation of this process; effortless and effectively. By this arrangement both me and my employer are acknowledging gold as money. Just as the Chinese government.

As I’m convinced gold will be part of a future monetary system, because a debt based monetary system is by definition not sustainable, along this scenario it can be no different than from where we are now developments as receiving a percentage of salary in gold are natural steps prior to a monetary transition.

Hat tip to Torgny Persson for this great initiative. I hope it will inspire more companies to follow suit. This wouldn’t be unlogic for companies in Asia where many people recognize gold for its monetary value, in contrast to the West. Asians tend to hold gold for the long term, to preserve family wealth, not for short term speculation.

[youtube https://www.youtube.com/watch?v=2tiXrY18lo4]



16th October 2014
For immediate release

Employees paid in Gold & Silver

SINGAPORE: Starting this month, employees of BullionStar Pte Ltd can choose to have their salary paid in Gold or Silver bullion. Mr Torgny Persson, CEO of BullionStar Pte Ltd says: “Gold and Silver has been used as money throughout centuries and keep its purchasing power over time better than any other asset class. By paying our staff in Gold & Silver, we allow them to save in real money that keeps its value over time. As all our staff already prior to this arrangement save & invest in precious metals, it’s natural for them to embrace the new arrangement.”

The reason why employee Hong Kang welcomes the idea: “I believe in saving in precious metals as I genuinely believe Gold and Silver preserves wealth. For the past two years, I have been putting part of my income into Gold and Silver for long term savings. As an Asian, I wanted to leave behind an inheritance for my children and what else makes a better inheritance than Gold and Silver. In fact, I am all excited about the new arrangement.”

BullionStar Pte Ltd is the FIRST company in SINGAPORE offering its employees to be paid in gold and silver. In doing so, employees can build a bullion portfolio effortless and effectively. More employers are expected to follow suit in the future as Gold and Silver is once again gaining traction in being
recognized as true money as fiat currencies are depreciating in value worldwide.

BullionStar Pte Ltd is a Singapore registered bullion dealer offering GST exempted precious metals for savings and investment. The Singaporean government exempted precious metals in 2012 with the objective of making Singapore a trading, transit and storage hub of precious metals.

Media Contact:
Ms Dawn Kor
E-mail: dawn.kor@bullionstar.com
Telephone: 6284 4653