Koos Jansen
BullionStar Blogs
Koos Jansen
Posted on 24 Nov 2014 by

Total Chinese Gold Reserves Approaching 16,000t

Chinese gold demand remains very strong throughout week 46 (November 10 – 14), withdrawals from the vaults of the Shanghai Gold Exchange (SGE) accounted for 52 tonnes. The year to date counter has reached 1,761 tonnes.

Below you can see a screen shot of the Chinese weekly SGE report disclosing total withdrawals.

Screen Shot 2014-11-23 at 5.56.59 PM
Blue (本周交割量) is weekly gold withdrawn from the vaults in Kg, green (累计交割量) is the total YTD.

Since we have confirmation from the SGE about the exact rules for Chinese domestic banks on importing gold through the Shanghai International Gold Exchange (SGEI), we know for sure trading volume on the SGEI can distort Chinese wholesale gold demand measured by SGE withdrawals (which also include SGEI withdrawals).

SGE Weekly Trading Volume
2014, weekly

Given the fact total SGE withdrawals are very strong tells us the Chinese are buying massive amounts of gold, of which most is imported. In contrast SGEI trading volumes are quite low, which suggests domestic banks do not import through the SGEI (I read from one domestic bank having imported 500 Kg through the SGEI).

Consequently I think SGEI trading is primarily done by foreigners in the Shanghai Free Trade Zone. All this volume is concentrated in the iAu9999 physical gold contract. Because this is a physical contract (100 % margin), and because of the low volumes, SGEI trading is not likely to be speculation, but simple physical buying. If these foreigners that buy physical also withdrawal the gold to ship it home or leave it in the SGEI vaults we don’t know.

By not knowing what happens on the SGEI, I think the best way of approaching Chinese wholesale gold demand is this: If we look at week 46, SGE total withdrawals were 52,260.2 Kg, SGEI volume was 1,478 Kg, meaning Chinese wholesale gold demand was in between 52,260.2 Kg and 50,782.2 Kg. This way year to date demand is in between 1,761 tonnes and 1,746 tonnes. Let’s stay conservative and use the bottom limit, which would have required 1,143 tonnes to be imported year to date, annualized 1,293 tonnes.

Shanghai Gold Exchange withdrawals 2014 week 46, dips

Using 1,143 tonnes as net imports year to date and 399 tonnes of mine supply, we can make the following estimate of total (public and private) Chinese gold reserves; 15,496 Tonnes. (click here for a detailed explanation of how I conceived this estimate.)

Total Chinese Gold Reserves 1995 - 2014
15,496 Tonnes Of Total Chinese Gold Reserves

More proof on PBOC purchases was disclosed by Deutsche Bank (DB) recently. In a report about the Swiss gold referendum they stated:

Of course, the passing of the referendum could act as a signal for speculators to ‘front-run’ SNB purchases. This additional demand could drive up prices. But there have been a number of examples of publically flagged large-scale official gold transactions that have had a limited market impact. In the IMF example above, gold prices rose steadily despite the IMF being a reliable seller of almost 20 tonnes each month. In another example, the Chinese government’s open market purchases of roughly 500 tonnes per year have not prevented the gold price from plummeting in recent years.

Let’s not discuss the price of gold for a second, but focus on what DB states on PBOC demand, which has been 500 tonnes for the last couple of years. This is not exact or official data, but it is more confirmation the PBOC is buying such amounts every year. We know the PBOC does not purchase gold through the SGE, so these purchases are in addition of Chinese wholesale gold demand and strengthen the composition of the previous chart.

Silver

Silver on the Shanghai Futures Exchange (SHFE) is trading in backwardation since August 6.

SHFE silver backwardation November 21, 2014

The discount on silver in China mainland relative to London is near 7 %.

Shanghai Gold Exchange SGE silver premium 2013, 2014

That’s it for this week’s China update. (I found some interesting things ‘on the ground’ here in Amsterdam regarding the repatriation of Dutch gold from New York by DNB, I think it’s in everybody’s interets I continue writing on that story.)

Koos Jansen
E-mail Koos Jansen on:

  • Em

    Email share doesn’t work! I’ve tried with several articles. :(

    • KoosJansen

      Thank you very much for notifying us on a technical malfunction. I will sent it through to the technical team.

  • Guy Christopher

    Question for Koos — Do you believe the Chinese are accumulating silver at the fastest pace possible as they seem to be accumulating gold?

    • KoosJansen

      I don’t have a clear view on the size of total Chinese silver demand.

      • socalbeachdude

        The Silver Institute is the authoritative source for that and you can bring yourself up to speed on those issues if you are interested at:

        http://www.SilverInstitute.org

    • socalbeachdude

      All of the latest supply and demand information for silver is available at The Silver Institute which is the world’s definitive and authoritative source for silver information. Most of the demand for silver in China is for JEWELRY and INDUSTRIAL purposes and not for investment / speculative purposes such as coin c9llecting. The government of China MAINTAINS ABSOLUTELY ZERO SILVER FOR ANY RESERVE PURPOSES and has 1065 metric tonnes of gold for reserves purposes (not 16,000 metric tonnes as this article absurdly and incorrectly asserts) according to the latest November 5, 2014 report from the World Gold Council.

      Total Physical Silver Demand Achieves Record Level in 2013
      https://www.silverinstitute.org/site/2014/05/14/total-physical-silver-demand-achieves-record-level-in-2013/

      • otoman

        If you have not figured out by now that the WGC is a govt. shill then it is your loss.

      • DameEdnasPossum

        Ha ha…relies on the WGC for authority perspectives on gold.

        That’s like relying on Neo-cons to negotiate peace deals, or British parliamentarians and catholic priests to advise on child welfare.

        You are clearly a fool of epic proportions…or in on the sale of the delusion. Either way…you’re wasting your time on an informed site like this.

  • Takai321

    Koos, excellent commentary!

    Question for Koos — Have you seen or heard any other sources for the 500 ton (PBOC annual open market purchases) figure? Deutsche Bank (DB) is making a public statement I had not heard before. Perhaps it is just my ignorance in this matter. They seem to be implying that this is public knowledge. Their other example cited, IMF sales, is public knowledge. Thank You

  • rowingboat

    I’d suggest this is poor analysis by DB (note they wrote “open market purchases”) and they’re making the same mistake as many others do…. that Chinese imports minus WGC consumer demand = PBOC demand (repeat a lie sufficiently and it becomes the truth).

    Instead take your post comparing the derived import number [wholesale / investment demand] and actual imports into mainland China [HK + UK + Switzerland + US + Australia]

    If actual imports had been greater than derived imports then we could confidently say the difference was PBOC demand… but they weren’t.

    This is all still speculation and I’d be using the official number personally until PBOC update it or there is sufficient proof to derive it.

    • KoosJansen

      With “open market purchases” they mean purchases in the OTC London Bullion Market, Switzerland or Hong Kong. Do not expect to see PBOC purchases in any customs data or on the SGE. They wouldn’t leave a trace IMO.

      • rowingboat

        500 tonnes seems suspiciously similar to the numbers being bandied about last year (Imports – WGC = PBOC). I don’t buy it Koos, not from our discussions of gold flows into and out of UK / Switzerland in the last decade. I can’t see this large amount coming from these same sources in addition to what we know from the customs data.

        • socalbeachdude

          Correct, rowingboat. Koos is just engaging in WILD AND BOGUS SPECULATION with no basis whatsoever in actual fact and his assertions are not supported by even a single iota of any evidence, leaving assist the bogosity of them based on simply math.

          • DameEdnasPossum

            Yeah…and your pontifications are base on hard facts.

            I have tears of joy from the mirth and humour induced by your extremely supercilious pompousness.

  • Lloyd Fournier

    Koos your articles are no longer appearing on the front of bullionstar.com

    The latest one on the front page is over a month old. I’m guessing this is not intended.

    • KoosJansen

      On the BullionStar homepage you can see a tab in the main menu titled “BullionBlogs Blogs”. There you can find all my articles.

      Thanks for the feedback

  • socalbeachdude

    These are totally false and bogus assertions regarding gold reserves held by the People’s Republic of China. Total government gold holdings in China are around 1200 metric tonnes and worth less than $65 billion at current market prices and account for less than 1.5% of total reserves held by the PRC.

    • Makati1

      Interesting that china produces about 400T of gold annually and none of it leaves China. Imports are tracked, for the most part, and cannot be fudged too much. So, prove your assertions socialbeachdude. The internet is at your fingertips with more facts and figures than you can possibly read in a life time. Use it. Opinions don’t count.

      • socalbeachdude

        The demand for gold in China is presently around 1000 to 1200 metric tonnes a year, and nobody is questioning that. However, none of that demand has anything whatsoever to do with the GOVERNMENT OF CHINA but rather is demand by the CITIZENS OF CHINA mostly for JEWELRY PURPOSES.

        China’s annual production of gold of around 300 metric tonnes (12% of around 2500 metric tonnes total in new mining production annually) does stay in China but is purchased by the CITIZENS OF CHINA and not kept by the government of China. You appear to totally not comprehend the difference just like the author of this article..

  • socalbeachdude

    What isn’t true at all is what you are falsely asserting. The GOVERNMENT of China has NOT INCREASED ITS GOLD HOLDINGS AT ALL and they are somewhere in the range of 1000 to 1200 metric tonnes.

    The CITIZENS of China have increased their gold holds and currently account for about 1000 metric tonnes a year (nearly 25%) of the 4560 metric tonnes of gold supply a year. The citizens of China are NOT THE GOVERNMENT OF CHINA The citizens of India have the largest holdings of gold of any country’s citizens and their total is around 16,000 metric tonnes, nearly all of which is in the form of jewelry, while the GOVERNMENT of India only has about 536 metric tonnes of gold in its holdings..

    I would suggest that you start comprehending the actual facts related to the gold markets and gold holdings around the world. In particular you need to comprehend the distinction between gold holdings by GOVERNMENTS versus CITIZENS of countries as that is where you appear to be totally confused.

    The US government gold holdings are meticulously reported at the end of each and every month and total around 8250 metric tonnes and the monthly reports can always be accessed at:

    http://www.fiscal.treasury.gov/fsreports/rpt/goldRpt/current_report.htm

    • KoosJansen

      Wow, you have a lot to LEARN.

      • socalbeachdude

        Nope. It is obviously YOU who has a lot to LEARN. Your absurdly false assertions demonstrate beyond appalling IGNORANCE of the facts which are very clear. Why are you putting up such totally false and bogus assertions?.

        • KoosJansen

          You make me laugh

          • socalbeachdude

            Are you really that ignorant or stupid or ill-informed? Or is the TOTALLY FALSE ASSERTIONS that you put up in this article part of a deliberate MISINFORMATION attempt like the Goobers Against Truth Association constantly puts up?

            There is no evidence whatsoever to back any of your preposterous assertions in your article above. None whatsoever. And all of the actual facts clearly show that the Chinese government holds at maximum around 1200 metric tonnes of gold. I would suggest you EDUCATE YOURSELF and a good place to start on all of the facts concerning gold is the World Gold Council at:

            http://www.Gold.org

            What I have stated in my comments here is 100% correct

          • KoosJansen
          • socalbeachdude

            I am 100% correct, and the article you posted in that link is just another self-serving article on this web site NOT BASED ON EVEN AN IOTA OF ANY EVIDENCE to support your wild and bogus speculators for which there is NO FACTUAL SUPPORT WHATSOEVER.

          • Cluez Jones

            Kooks, please ban this guy from posting.

          • socalbeachdude

            Are you really that clueless and totally afraid of the facts and truth, Cluez? Why? The TRUTH will set you fee from ignorance.

            The World Gold Council is the definitive and authoritative source for gold reserves holdings by country and their latest report as of November 5, 2014 shows China ranked as #7 in the world with the largest country reserves gold holdings and the official amount that China holds is 1054 metric tonnes confirmed by this report.
            You can access the report using the following link and you will need to establish an account (no charge) with the World Gold Council to obtain access to the latest Country Gold Reserves document:

            http://www.gold.org/search/news/countries%20reserves

            The official numbers which state gold holdings in metric tonnes in this November 5, 2014 report which include the IMF (International Monetary Fund) are:

            1) United States 8,133.5
            2) Germany 3,384.2
            3) IMF 2,814.0
            4) Italy 2,451.8
            5) France 2,435.4
            6) Russia 1,149.8
            7) China 1,054.1
            8) Switzerland 1,040.0
            9) Japan 765.2
            10) Netherlands 612.5

            Further information about all aspects of gold are available from the home page of the World Gold Council at:

            jhttp://www.Gold.org

          • digi

            You believe that majority of the posters here dunno the above bullocks? You think the author dunno this? You really are on an IQ level of 1 out of 100. As the author has generously stated, YOU HAVE MUCH TO LEARN or get back to your Black Friday Queue!

          • socalbeachdude

            You sound like another clueless gold bug totally in denial over the facts regarding gold. The World Gold Council is the definitive and authoritative source regarding gold statistics and its latest November 5, 2014 report clearly shows that the total gold reserves held by China are 1,054 metric tonnes.

            The World Gold Council is the definitive and authoritative source for gold reserves holdings by country and their latest report as of November 5, 2014 shows China ranked as #7 in the world with the largest country reserves gold holdings and the official amount that China holds is 1054 metric tonnes confirmed by this report.
            You can access the report using the following link and you will need to establish an account (no charge) with the World Gold Council to obtain access to the latest Country Gold Reserves document:

            http://www.gold.org/search/news/countries%20reserves

            The official numbers which state gold holdings in metric tonnes in this November 5, 2014 report which include the IMF (International Monetary Fund) are:

            1) United States 8,133.5
            2) Germany 3,384.2
            3) IMF 2,814.0
            4) Italy 2,451.8
            5) France 2,435.4
            6) Russia 1,149.8
            7) China 1,054.1
            8) Switzerland 1,040.0
            9) Japan 765.2
            10) Netherlands 612.5

            Further information about all aspects of gold are available from the home page of the World Gold Council at:

            http://www.Gold.org

          • digi

            No need to ban him, idiots embarrassing himself amongst adults. Just shows why certain people are beyond hope/redemption and as well as using that thing we call a brain (not that he’s using any of it). Yea yea, WGC is the god of the one and only, take your propaganda and feed it to your pigs, don’t feed it where we consider it toilet roll.

            Get the Fed to audit its GOLD stock and I’ll crown you KING! Moron.

          • KoosJansen

            Ban him? Of course not, this guy is amazing.

          • Indian

            HI Koos, I think that guy has got a Point, I agree that in a totalatarian regime it is hard to pin point how much of Gold is in Government reserve and it is only speculative because we cannot expect the Govt to reveal the true numbers, but 16000Tons of gold is pushing it too far, and as far as the Yearly consumption goes, China consumes 25% of Gold produced annually, followed by India, the drop in consumption in India, thanks to the Government taxing and regulation on Gold Imports, but that is the Gold consumed by the People not the Govt, these are two different things like he pointed out. So you might have to re do your research on it !

          • http://www.bullionstar.com Koos Jansen

            O, btw, the WGC just revised its Chinese gold demand numbers of 2013 from 1066 tonnes to 1275 tonnes, because their low numbers were untanable after more more analysts began writing about SGE withdrawals.

          • 02144pomroy

            Obviously Koos you are not extending much of an effort in defending your view. “you make me laugh” doesn’t cut it as an answer or defense. This makes me think socalbeachdude may have a valid point. Where’s the passion Koos?

          • KoosJansen

            If socalbaechdude clicks all the links provided in all my articles he (and everybody) can find all the evidence I have provided for my statements. Since he’s too lazy to read all my work and is only SCREAMING it’s simply not true, I’m not gonna waste one minute explaining him.

          • socalbeachdude

            Your links are PURELY SELF-SERVING AND BOGUS and do not reference any credible external sources to back even a single point in your hilariously DEAD WRONG views and assertions. Moreover, all your assertions are directly CONTRADICTED BY THE WORLD GOLD COUNCIL which is the authoritative and definitive source for all information concerning gold statistics.

        • Makati1

          China’s gold imports alone have average over 600T/year for the last 4-5 years. Plus in-country production of ~400T year. Do the math socialbeachbum.

    • Makati1

      If the US has ANY gold, why will they not allow a real audit and maybe put it on TV? Because it is ALL gone. Zip! Zero! They cannot even send Germany’s gold back to them because it too is gone.

      • greg scott

        Because the people in power are all lying scum who don’t think they are accountable to their subjects. And so far they aren’t.

      • socalbeachdude

        Where do you come up with such nonsense?

        The US government gold holdings are meticulously reported at the end of each and every month and total around 8250 metric tonnes and the monthly reports can always be accessed at:

        http://www.fiscal.treasury.gov/fsreports/rpt/goldRpt/current_report.htm

      • socalbeachdude

        The 8250 metric tonnes of US government gold has nothing whatsoever to do with gold stored by the Federal Reserve to client central banks such as Germany.

        Germany NEVER ASKED FOR ANYTHING OTHER THAN A 7 YEAR TIME TABLE TO MOVE 20% OF THEIR 1500 METRIC TONNES OF GOLD stored at the Federal Reserve New York Branch which is in the process of timely scheduled transfers and Germany fully confirmed that they intend to MAINTAIN 80% OF THOSE GOLD HOLDINGS right there indefinitely in the bullion vaults of the Federal Reserve New York Branch amounting to 1200 metric tonnes.

        http://www.forbes.com/sites/afontevecchia/2013/01/16/germany-repatriating-gold-from-ny-paris-in-case-of-a-currency-crisis

        More than half of the 3400 metric tonnes of gold owned by Germany is stored in vaults in Germany, mostly in Frankfurt. Germany hasn’t bought or sold gold since 1973, and tried to keep its reserves “as far west as possible” during the Cold War, according to Bundesbank board member Carl-Ludwig Thiele, who prepared an important presentation (in German) on the matter. Frankfurt brought back 940 tons from the Bank of England in 2000/1 in order to avoid storage costs, according to the FT, and has sold about 5 to 6 metric tons a year to the finance ministry to mint coins. Neither the New York Fed nor the Banque de France charge Germany to store its gold.

        While Thiele didn’t speak of how it would be transported for security reasons, the 300 metric tonnes of gold coming from the U.S. will probably have to be flown in which will probably have to be done in 3 to 5 ton shipments, the maximum insurance companies will cover, meaning it will take between 60 and 100 flights.

        http://www.forbes.com/sites/afontevecchia/2013/01/16/germany-repatriating-gold-from-ny-paris-in-case-of-a-currency-crisis/

        Of the approximately 3,400 metric tonnes of gold that Germany owns, and 1,500 metric tonnes are stored at the Federal Reserve New York Branch of which Germany plans to move 300 metric tonnes back to Germany’s Bundesbank by 2020

        The 1500 metric tonnes of gold owned by Germany and held in the Federal Reserve Bank of New York Depository facility HAS NOTHING WHATSOEVER TO DO WITH US GOVERNMENT GOLD but is being stored at the request of Germany in the bullion depository vaults at the New York Branch of the Federal Reserve.

        The Federal Reserve owns very little gold of its own and that has long been the case as they do not consider it of any financial utility, but it does acts a a trusted and very reasonably priced DEPOSITORY for many other entities including foreign governments to house their gold in its vaults particularly at the New York Branch all of which is fully there and which you can see for yourself:

        Inside Americas Money Vault – National Geographic Documentary

    • digi

      clueless minions appear everywhere I guess. You better get back to your black Friday queue otherwise you may just miss out on your barbie doll. Keep the intellectual stuff to people that know how to use their gray matter. Back in the queue.

  • socalbeachdude

    The government of China DOES NOT BUY GOLD, but rather is the world’s largest single seller of gold each year. It is the world’s largest gold producer with new mining and has about a 12% market share of the around 2500 metric tonnes of new gold mined every year and it sells all of its production of around 300 metric tonnes of gold each year at market prices inside China.

    Total gold holdings of the government of China are in the range of 1020 to 1200 metric tonnes which has a value at current market prices of between $50 to $65 billion which is a tiny fleck of dust in terms of value compared to the $25 TRILLION CREDIT / DEBT BUBBLE that China has blown over the past 10 years. China has clearly stated many times that it has no interest in holding government gold at anywhere above 1.5% of reserves.

  • Makati1

    Actually, I just read another article that showed how China’s gold holdings may be double the 16,000T. It depends on when you start counting. They definitely have more than they tell the world, of everything. The Chinese are not stupid. They play a long game. The West only sees the next quarter.

  • garyamusic .

    Gotta love the back and forth between folks here that think they have the inside scoop on what or how much of this or that that any government holds………………….funny stuff.

  • socalbeachdude

    Central banks have REDUCED THEIR GOLD HOLDINGS BY AROUND 10% over the past 10 years from around 35,000 metric tonnes to currently around 32,000 metric tonnes as confirmed by the November 5, 2014 report from the World Gold Council which shows current gold reserves holdings (including the IMF) at 32,056.6 metric tonnes.

    http://www.Gold.org

  • socalbeachdude

    As to Switzerland, they are DUMPING GOLD on a net basis and that inane referendum today there to require the central bank there to buy more gold went down in OVERWHELMING DEFEAT.

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