Koos Jansen
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Koos Jansen
Posted on 4 Dec 2014 by

World Gold Council Rectifies 2013 Chinese Gold Demand

The WGC has revised its estimate of China’s 2013 consumer demand to 1,275 tonnes, up from their initial estimate of 1,066 tonnes.

My research on the Shanghai Gold Exchange and the structure of the Chinese gold market was, inter alia, confirmed in September this year by the work of Na Liu (CNC Asset Management Ltd.). As myself Na concluded Chinese wholesale gold demand equals withdrawals from the Shanghai Gold Exchange and this is far greater than demand reported by the World Gold Council.

The World Gold Council (WGC) has never openly responded to my publications. However, Na met with the WGC Market Intelligence team, the discussion that ensued led the WGC to rectify their 2013 Chinese demand numbers. From CNC Asset Management, November 27 2014:

We are pleased to report that we just had an in-depth discussion with the Market Intelligence team of the World Gold Council (WGC). Our discussion focuses on how to explain the significant gap between China’s consumer demand of gold, as defined and reported by the WGC to be just over 1,000 tonnes in 2013, and China’s wholesale demand, as defined and reported by us to be about 2,200 tonnes based on the Shanghai Gold Exchange (SGE) vault withdrawals during 2013. The following are our takeaways from the discussion:

First, the WGC has revised up its estimate of China’s 2013 consumer demand to 1,275 tonnes, up from their initial estimate of 1,066 tonnes.

Click here to read the full report.

The rest of the report from CNC Asset Management sums up, again, all the reasons given by the WGC that should explain the remaining difference between SGE withdrawals and WGC demand numbers. The WGC has published two reports on the Chinese gold market since April that both failed to clarify the difference. In fact, the reports led to even more speculation about why the WGC was withholding essential data about the Chinese gold market. In September I wrote:

…as time goes by and knowledge about the Chinese gold market is slowly spreading through the international gold space, the more pressure is building on WGC demand numbers regarding China.

According to the China Gold Association (CGA) demand in 2013 was 2,199 tonnes, which leaves a difference of 924 tonnes with the revised numbers from the WGC. The aggregated difference from 2007 until 2013 is 2,172 tonnes. The next chart is scanned from the China Gold Yearbook 2014, which is only published in hard copies written in Mandarin. It shows Chinese gold demand reported by the CGA.

Chinese gold demand by the China Gold Association 2004 - 2013
The blue bars represent demand in tonnes, the red line the yearly increase in percentages.

Chinese gold demand 2007 2013

Additionally, 2014 will at least add 900 tonnes to the aggregated difference. At year end the total aggregated difference will be well over 3,100 tonnes. 

In a forthcoming post I will once again share where I disagree with all the excuses the WGC presents in the CNC Asset Management report. A few more details I have to work out about the gold lease market, after which I can demonstrate the WGC is simply unwilling to accurately report on Chinese gold demand.

From the latest CNC Asset Management report:

…Both the WGC and we at CNC believe that more work needs to be done to understand China’s actual gold demand.

This is very hard to swallow, the WGC has been involved in the Chinese gold market since 1999 and they have two offices in China with numerous Chinese employees, yet they state “more work needs to be done to understand China’s actual gold demand”. 

Additionally, I will share my disagreement with Jeffrey Christian from CPM Group on SGE withdrawals. Mr Christian has recently send an email to Mineweb.com, stating Chinese demand is lower than SGE withdrawals because scrap is higher than most are capable of understanding (including the CGA apparently). A quote from Mr Christian’s email:

…I assume anyone writing about fabrication demand levels for gold knows this, but thought I would mention it to you in case it’s news to you. I know that when I mention it in presentations to mining executives, institutional investors, Eric Sprott, the WGC, and other gold market participants or observers, they often have no idea of this, and sometimes cannot even understand the processes I am describing.

His reasoning reminded me of what he wrote on my blog earlier this year:

Over the years the ‘over-age’ of SGE withdrawals to estimated demand has ranged from 14% to 41%. People may say that one equals the other, but they simply do not.

…I could bore you witless with examples of similarly cavalier use of language and statements from around the world’s precious metals market. I won’t. Many things simply are not as they seem to be, nor as they are said to be.

Meanwhile Chinese wholesale gold demand, measured by withdrawals from the Shanghai Gold Exchange (SGE), remains strong. In week 47 withdrawals accounted for 52 tonnes, year to date the counter has reached 1,813 tonnes.

Screen Shot 2014-12-04 at 11.53.13 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.

Corrected by trading volume on the Shanghai International Gold Exchange (SGEI), Chinese wholesale demand in week 47 was in between 49 and 52 tonnes, year to date in between 1,795 tonnes and 1,813 tonnes. For the next chart I have used the most conservative estimate.

Shanghai Gold Exchange withdrawals 2014 week 47, dips

Koos Jansen
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  • Sven

    Kudos Koos. Let’s hope extracting proper data out of the WGC isn’t a constant fight like it is with the BLS in the US. Revision after revision, quarter after quarter. Bogus statistics purposefully put forth to tire the analysts….

  • Reymidas Fund


    • KoosJansen

      Not with respect to the Chinese gold market, which makes their overall credibility very poor.

      • philipat

        And WGC never issued ANY comments on The Swiss Gold Initiative. Surely, as an advocacy organization, they should have been issuing position papers in support of the initiative, with backup data. But no, not a word from them.
        Again, it makes me wonder why ANY Gold producer would pay good money to be a member of any Organisation which appears to be acting against the best interests of its membership? In fact, if all the producers were to withdraw and leave behind only the Bullion Banks and other Paper Gold Traders as members, that would expose the true nature of the beast?

        • Murphy

          Iamgold did this recently, I am sure only as a cost cutting measure. I hope though that other miners follow suit.

  • KoosJansen

    I have written many times about the scrap cycles in China. Fact is, it was 247 tonnes in 2013 by the widest measure. http://disq.us/8l8270

    • philipat

      Yes, so my comment above about “Equalising out Scrap and PBOC demand was more than fair to them (With estimated annual PBOC purchases offshore of, say, 500 Tonnes) But if this is what WGC and Christian are alluding to, you do now need to dispute their arguments again. Conversely, if the scrap issue is not their problem, then what exactly is their issue? I look forward to you promised article on why the WGC will not accept the SGE offtake as a reflection of Chinese wholesale demand even after confirmation by the Chinese themselves?

  • rowingboat

    Thanks for sharing the report, Koos
    There are some telling statements in there reconfirming my views on this, in particular a thick layer of investment demand that WGC is unable/unwilling to measure, not only China but globally, which can only be revealed from the national import / export data.

    Add WGC’s estimate of 600 tonnes (Chinese institutional demand in 2013) to their consumer demand measurements and voila. What’s funny is that the WGC is able to measure some demand and some supply, then balances it out in the OTC line! But it’s the OTC stock flow across the globe, which is most important and not being measured/reported.

    The WGC should be reporting total demand (investment + consumer), which would be closer to reality in China. The fact that the media only reports consumer demand is a disgrace, and WGC should rectify it.

    “And not all institutional purchases are captured in WGC’s consumer demand estimate. (In our China Express dated April 15, 2014, based on financial reports of China’s listed banks, we calculated that their aggregate gold holdings increased by some 600 tonnes in 2013)…

    Fifth, conceptually some amount of gold could be withdrawn from the SGE vaults directly by individual investors. These investors, as long as they do not care about the physical appearance of the bars, might prefer direct purchase from the SGE rather than from gold shops…

    The WGC stresses that the difference between their estimate of China’s consumer demand and our estimate of wholesale demand are captured in WGC’s “OTC Investment and Stock Flows” figure in their “Gold Demand Trend” report.”

    • KoosJansen

      Fifth, conceptually some amount of gold could be withdrawn from the SGE vaults directly by individual investors. These investors, as long as they do not care about the physical appearance of the bars, might prefer direct purchase from the SGE rather than from gold shops…

      I’ve written exactly this months ago https://www.bullionstar.com/blog/koos-jansen/wgc-understand-chinese-gold-market/

      SGE bars are the cheapest not the prettiest, but how many gold investors would care? While the WGC measures gold sales in retail, SGE delivery captures the true size of demand.


      The chairman of the SGE, Xu Luodo, said on May 15, 2014, at the Fourth Commercial Bank Gold Investment Forum, that China net imported 1540 tonnes in 2013 and his exchange has nearly 8000 institutional investors and 5 million individual investors. Institutional investors can include pension funds and alike, this explains very well where all the SGE withdrawals end up and the difference we’re after. I haven’t come across any Western mainstream media outlet that reported on these statements from Xu, though numerous Chinese media have covered it, to date you can only read it in English on this blog…

      • rowingboat

        In keeping with your theory about something being up, take a close look at Swiss imports this year. Overall imports are well down anyway in 2014 but if you strip out what the UK has exported, imports are below levels at the start of the bull market in 2001. In October UK exports to Switzerland dropped significantly so this source could be drying up just as India is set to ramp up again in 2015 versus 2014.

  • Matt

    This isn’t news – I told you this in October and the revisions were made some time earlier. If you add industrial demand you get to a figure nearer 1,350t I think.

    • KoosJansen

      Is there an official statement from the WGC about the adjustment?

      • Matt

        Not sure about WGC. GFMS (who do the data, it has very little to do with the WGC) did address the issue in the launch of their Gold Survey 2014 in May.

        • KoosJansen

          I’m focused on the WGC for now. After all, they are the global authority on gold.

          • Matt

            Yes, but they do not compile their own statistics. They use GFMS statistics exclusively.

          • KoosJansen

            I know, but for te sake of informing the WORLD on gold demand I think the WGC is obliged to make a statement about this.

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