Koos Jansen
BullionStar Blogs
Koos Jansen
Posted on 5 Nov 2014 by

The Mainstream Media Versus Gold

One of these weird things happened on Monday November 3, 2014, in the gold space. I published an article in which I reported gold demand in China, measured by withdrawals from the vaults of the Shanghai Gold Exchange (SGE), was exceptionally strong in recent weeks. In week 43 SGE withdrawals accounted for 60 metric tonnes of gold (SGE withdrawals have proven to be the best indicator for Chinese wholesale demand, confirmed by SGE officials). Additionally, I hinted at the fact the Chinese continue to buy more gold whenever the price drops, and the price has been dropping for the past two weeks.

SGE withdrawals 2014 week 43, dips
Exhibit 1. Chinese gold demand rises if the price falls.

The same day Reuters and the Wall Street Journal reported Chinese gold demand was weakening, regardless of the low prices. Let’s go through their analysis. From the WSJ:

Gold prices in Shanghai normally carry a premium to global prices, but that reversed to a rare discount Monday. The premium, which is attributable to capital controls, was $2 to $3 an ounce to London prices about a week ago.

…“You would not have expected Shanghai gold to be at a discount,” said a leading Hong Kong-based executive with an international bank, who didn’t want to be identified. “The physical buying in gold has dried up.

From Reuters:

Unusually, prices on the Shanghai Gold Exchange, the world’s biggest platform for physical trade, are at a discount of around $1 an ounce to the global benchmark, slipping from premiums of $1-$2 an ounce last week.

Both these mainstream media are stating SGE gold was trading at a rare discount on November 3, 2014. First of all, an SGE discount isn’t rare at all, it happens all the time. This is incorrect information from the mainstream media.

Shanghai Gold Exchange SGE gold premium 2008 2014
Exhibit 2. SGE premiums are usually the inverse from the price of gold.

Second, SGE gold wasn’t trading at a discount on November 3, 2014.

I have two data feeds for charting SGE gold premiums. One is from the SGE itself, published in their weekly Chinese reports, the other one I use is from Sharelynx.com, which has setup an automated Excel sheet for me that daily updates many quotes I track. The next chart is based on the numbers from Sharelynx, updated until November 4, 2014:

Shanghai Gold Exchange SGE gold premium 2014
Exhibit 3. According to my data there was no discount on the SGE November 3.

As you can see on November 3 the SGE physical contract Au9999 was trading at a premium to London spot (I also double checked the premium manually). The discount reported by the mainstream media is incorrect information.

In the next chart we can see SGE premiums are correlated to SGE withdrawals. Which makes sense as the Chinese buy more gold when the price drops (exhibit 1) and SGE premiums go up when the gold price drops (exhibit 2).

Shanghai Gold Exchange withdrawals 2014
Exhibit 4. Correlation between SGE withdrawals and SGE premiums.

More from Reuters November 3, 2014:

Since all physical gold trade in China goes through the exchange [SGE], it is seen as a reliable barometer of Chinese demand.

SGE officials, and the China Gold Association, have clearly confirmed withdrawals are the best indicator for Chinese wholesale gold demand. From Scotiabank, September 29, 2014:

First, the withdrawal data reflects the actual gold wholesales in China. In 2013, the total gold withdrawal from the SGE vaults amounted to 2,196.96 tonnes. The President of the SGE Transaction Department said: “This 2,200 tonnes of gold, after leaving our vaults, they entered thousands of Chinese households in the form of jewelry and investment purchases.”

Though Reuters acknowledges all physical gold trade in China goes through the SGE, they refuse to publish the numbers on how much is going through (SGE withdrawals). I think it’s weird mainstream media never report on SGE withdrawals, or the significance of these numbers. If Reuters would have reported on SGE withdrawals on November 3, it would be impossible to commingle with a story of weak Chinese gold demand.

When I first found out about SGE withdrawals in May 2013 I’ve written emails to many mainstream media (Bloomberg, the Financial Times, the Guardian, Reuters, etc.). Hereafter, both Reuters and Bloomberg reported about SGE withdrawals once (that I know of).  Bloomberg, 15 July 2013:

The Shanghai Gold Exchange supplied 1,098 metric tons in the six months through June, compared with 1,139 tons for the whole of last year, according to data from the bourse today. 

Reuters on 18 October 2013:

Physical deliveries from the Shanghai Gold Exchange totaled 1,709.056 tonnes as of Friday, data on the exchange’s website showed. 

After these publications Bloomberg and Reuters stopped reporting on SGE withdrawals. (please comments below if I’ve missed any mainstream media publications on SGE withdrawals).

Reuters reporting on weak Chinese gold demand while SGE withdrawals have been sky high in recent weeks, reminded me of an older article from Reuters. From September 12, 2014:

India’s love affair with gold may be over, as prices slide

Kiran Laxman Salunkhe used to buy jewellery during religious festivals, but sliding gold prices have led the young farmer to break with his family’s traditional investment.

This year Salunkhe has deposited his hard-earned savings at the bank for the first time in a decade…

…”Nowadays it is risky to keep jewellery. Burglaries are rising,” he said. “With a fixed deposit there is no risk.”

That’s right, Reuters’ headline literally stated “India’s love affair with gold may be over”, because Kiran Laxman Salunkhe, a young farmer, stopped buying gold. India’s population is over 1.2 billion people and I’m not so sure if they all stopped buying gold in September to open up a bank account.

India Gold Import September 2014

Recently India’s custom department came out with the gold import numbers from September (when Kiran Laxman Salunkhe stopped buying gold). India officially imported, excluding smuggling, 94 tonnes of gold, which was the strongest month since June 2013. The indians imported this much gold despite the 10 % import duty.

Of course India’s love for gold is part of their culture and is engraved into the DNA of the Indian population. Reuters’ headline and article in itself were ridiculous. The fact that India actually imported more gold in September than they had over a year makes the article completely incorrect.  

Can it be Chinese gold demand is currently very strong, despite the WSJ quotes a leading Hong Kong-based executive with an international bank, who didn’t want to be identified, stating: The physical buying in gold has dried up”? Yes it can.


I always wonder why the mainstream media notes gold premiums denominated in dollars, according to my logic it’s better to note this in percentages. Imagine, for example, the price of gold falls to $200 dollar an ounce in three months, or rises to $4,000 an ounce. What then does a $2 dollar premium in Shanghai tells you when reading back the WSJ article of November 3? Percentages would work much better IMVHO. 

It probably has got something to do with the USD hegemony; the more the USD is used as the ultimate measure of value, the longer everyone will believe it is. In my world all goods, services, assets and currencies constantly fluctuate in value relative to each other. Over the long term, though, gold has proven to have to most stable exchange rate against goods. 

Koos Jansen
E-mail Koos Jansen on:

  • http://www.bullionbaron.com/ Bullion Baron

    Having spoken with several mainstream media financial commentators in the past I would say their mistakes and context are unlikely to be purposefully negative on Gold. Many of those writing the mainstream media articles are not nearly as familiar with the markets as you would think, many of their comments and figures come from other sources (including at times from each other or from the same source).

    • KoosJansen

      Does that make their reports less incorrect? How hard can it be to publish SGE withdrawals?

      • http://www.bullionbaron.com/ Bullion Baron

        Not at all and I wasn’t trying to excuse it, but I don’t think they purposefully write to support the USD hegemony.
        I think the best thing you can do is exactly as you’ve done here. Point out their mistakes and explain (politely) how they were wrong. Get yourself onto their sources list and perhaps the quality of MSM articles will improve!

    • DameEdnasPossum

      Maybe…but ignorance is no excuse when serving such a function for society. If we excuse financial commentators for not understanding their area of supposed expertise, shall we excuse doctors and engineers should they fail in their duty?

      Their conduct is negligence. They have failed in their duty as an important check and balance of society.

      So maybe then they are in fact a conscious part of the bullion manipulation.

      There is absolutely zero doubt they are part of the widespread propaganda and opinion manipulation of society that contributes towards keeping this ponzi scheme alive. Same as it ever was.

  • KoosJansen
    • KoosJansen


  • Roacheforque

    I think if you will look into the entities that own Reuters you will uncover the ulterior motives in their misreporting. They do indeed support the continuation of the debt-based international financial and monetary system, in my opinion. After all, their owners are the architects of its present incarnation.

  • annoymous

    you can hardly expect any truthful reporting from Reuters when they are now involved in the Fix

  • Joshua Roberts

    stupid like a fox: perception management via hijacked media is an essential component of the overall manipulation solution set.

  • veerar

    Indians always buy Jewelry and the knowledgeable ones,buy Gold Bullion.,When an Indian Farmer buys Jewelry,his wife is happy too.

    The Indian Farmer is waiting for the QE of ECB ……The Indian Farmer simply likes Gold and Silver..

  • KoosJansen

    Here it comes. Reuters on november 9:

    A rush of physical buying in the past week – from jewelry in Shanghai to coins in Germany http://in.reuters.com/article/2014/11/09/gold-prices-poll-idINKCN0IT0H520141109

    They suddenly admit Chinese gold demand was strong in the past few weeks. But it of course it won’t be in the future :p

Copyright Information: BullionStar permits you to copy and publicize blog posts or quotes and charts from blog posts provided that a link to the blog post's URL or to https://www.bullionstar.com is included in your introduction of the blog post together with the name BullionStar. The link must be target="_blank" without rel="nofollow". All other rights are reserved. BullionStar reserves the right to withdraw the permission to copy content for any or all websites at any time.