36% of October U.S. gold exports to China went direct rather than via Hong Kong

Latest statistics from the USGS make for interesting reading – not just because they show U.S. gold output has been continuing to fall – it’s down 7.4% year on year to date – but for the country by country export data.  We have been commenting on Mineweb.com for much of the past year that imports to mainland China via Hong Kong remain significant, but by no means as significant as in the past.  We have come up with this viewpoint through extrapolation of Chinese Shanghai Gold Exchange data  which has been high – particularly in the  final quarter of the year – even while net gold imports from Hong Kong have slipped sharply.  Thats an anomaly that is hard to explain unless substantial gold imports are coming in by other routes.

But I’ve just received some interesting statistical data from the USGS which shows that a substantial proportion of U.S. gold exports to Hong Kong and China in October went directly to the mainland.  Further checking reveals that this was also the case in September, although not before.  The October figures were 12.9 tonnes to Hong Kong and 7.4 tonnes directly to the mainland – or 36% of the total.  By contrast, in October 2013, only 0.36 tonnes were shipped direct to the mainland and 17.8 tonnes to Hong Kong.  A very substantial change indeed.  These latest figures tie in remarkably well with our opinions on the breakdown of Chinese gold imports and that while Hong Kong remains a significant import route, it is not nearly so important in the overall picture as it used to be.

I have commented recently (yesterday) in an article on Mineweb on the continuing emphasis by mainstream media on the Hong Kong to China export figures which taken at face value would seem to present a misleading picture.  Do click on How significant was the 32% fall in Hong Kong exports to China  to read this article in full.  A second more detailed article on the U.S. October mine production and export data is also now up on Mineweb.  Click on U.S. 10-month gold mine output falls 7% y-on-y to read.

big chinese gold import figure from hong kong in November

Big Chinese gold import figure from Hong Kong in November

By Lawrence Williams

While the Hong Kong gold export figures may no longer provide such a good proxy for the level of Chinese gold imports as in days past, given the apparent rise in imports through Shanghai and Beijing (which are not imported) the Hong Kong figures do provide an important indicator to what is going on in terms of Chinese gold consumption.  We still consider the weekly Shanghai Gold Exchange (SGE) withdrawals figure as the most significant statistic in this respect for overall demand but the Hong Kong figure (the continuation of statistical data set up under the old British Administration) does provide an indicator of gold import flows into China.

Thus the latest figure to emanate from Hong Kong do support much of our other data which show that China’s gold imports (and consumption) have been picking up strongly in the latter part of the year as the Chinese New Year approaches.  Figures released by the Hong Kong Census and Statistics Department show that net gold exports to mainland China via this route totalled 99.11 tonnes – the highest level for nine months, following a strong month in October too when a net 77.6 tonnes were imported into mainland China through the former British Crown Colony.

Chinese gold demand tends to pick up in the runup to the Chinese New Year celebrations, which next year falls at one of the latest possible dates on February 19th.  With the strong figures seen through the SGE, and now Hong Kong we could be looking at a very strong December, January and February period for gold imports into mainland China and total gold consumption there.  See: Chinese gold demand already over 2,000 tonnes in 2014

The Chinese also tend to be price sensitive in their buying patterns and low gold prices may also be stimulating demand both from consumers directly, and fabricators and traders looking to build up stocks ahead of the New Year celebrations.

Recently we noted here that Chinese gold demand as represented by withdrawals from the SGE had already reached over 2,000 tonnes and was heading towards a year-end total of probably just under 2,100 tonnes – getting close to 2013’s 2,181 tonne record.  It looks like Chinese demand, which on a fundamental supply/demand basis should in theory be the key factor in driving up the gold price, seems to be as strong as ever.  However as we noted here in our article on silver, also posted today that, increasingly, real supply/demand fundamentals are being superseded by manipulative trading on the futures exchanges in setting gold price, and silver price, levels.  But even so, this incessant flow of gold from weaker hands in the West to strong hands in the East is certain, one day, to have a positive impact on price, but when that day will come is hard to predict.