China Gold, Swiss Gold Anomalies, Gold Price, Russian Gold Reserves, Gold ETFs, Gold:Silver Ratio, etc.

My recent articles published on the Sharps Pixley website.  Click on titles to read in full

LAWRIE WILLIAMS: Gold:Silver ratio elevated again and may stay high

After a drop to below the 80 level, the GSR has risen back up to the mid-80s and while still well below its recent high is performing worse than we had earlier predicted. It may remain elevated for now but long term prospects remain positive.

LAWRIE WILLIAMS: Anomalous Swiss Gold Imports and Exports Continue in October

The apparent reversal of Swiss gold flows with European consumers replacing Asian and Middle Eastern ones as primary recipients of Swiss re-refined gold has continued for yet another month

LAWRIE WILLIAMS: Gold steadies as equities, bitcoin stutter amid trade talks impasse

21 Nov 2019 – The gold price suffered last week on talk of perhaps a more full-on trade deal between the U.S. and China

LAWRIE WILLIAMS: Russian central bank now holds over 2.250 tonnes of gold

The Russian central bank has announced it added 9.33 tonnes of gold to reserves in October bringing its total holding to just over 2,251 tonnes

LAWRIE WILLIAMS: Central banks only hold gold for traditional reasons. BS?

Despite long-held claims from central banks that they only hold gold reserves for traditional reasons, they are collectively increasing their holdings which draws this claim into question.

LAWRIE WILLIAMS: China‘s 2019 gold demand headed for 20% drop

Latest gold withdrawal data from the SGE for October are well down on previous years and suggest Chinese gold demand in 2019 could be down around 20% year on year. However gold ETF and Central Bank demand is compensating for the Chinese drop.

LAWRIE WILLIAMS: Chinese central bank stops buying gold – or does it?

Latest figures from the People’s Bank of China suggest that there was no increase in the nation’s gold reserves in October after ten successive months of reported rises. However some observers feel Chinese gold reserves are hugely understated.

LAWRIE WILLIAMS: Gold: ETF inflows and central bank purchases offset weakness elsewhere

The latest Gold Demand Trends report from the WGC emphasises that continuing high gold ETF inflows and central bank buying are more than offsetting some weak data in more traditional gold demand markets

LAWRIE WILLIAMS: Gold: Same old, same old! Uncertainty rules.

Gold in the past week has seen yet another wash, rinse, repeat cycle but has ended the week comfortably above the key $1,500 level despite what might have been seen as strong headwinds in the past,

Latest figures for Chinese gold imports for September show another poor month – below those for August, but the likely Chinese shortfall is being counterbalanced by increases in the holdings of gold ETFs and a continued high level of central bank gold…

Does ANY central bank hold the physical gold it says it does?

Most gold analysts tend to disbelieve Chinese figures for its central bank gold holdings.  China has a track record of holding physical gold in other accounts than those it reports monthly to the IMF – and then from time to time moving some of this gold into the reporting account – the last such occasion being in July last year when its reported reserves rose from 1,054 tonnes overnight to 1,658 tonnes – a rise of 57%.

Since then China has been reporting official gold reserve purchases monthly – but again no-one outside the Chinese government system knows whether this is an accurate representation of what China is buying on the open market, or perhaps just a part of it, or whether the country has a further enormous stash of physical gold lodged in other non-reported accounts, or perhaps even in the vaults of the state-owned commercial banks, which are believed to hold perhaps as much as 2,000 tonnes of the yellow metal.

But at least China has been partly honest in telling the world that it has been somewhat economical with the truth over its real gold reserve levels in the past – and may still well be holding much more than it officially admits.  But what about other nations and their gold holdings?  Do we have any real reason to believe they are what they say they are?  Many central banks are known to have entered into gold swaps with commercial entities which allows them to retain the accounting fiction that they still possess this physical gold, yet it is actually held elsewhere and may not be returnable in a tight supply situation.  The latest such central bank to do so is almost certainly that of Venezuela, officially the world’s 16th largest holder of gold, which has exported over 48 tonnes of gold to Switzerland over the past few months, yet still apparently reports an unchanged central bank gold holding of 361 tonnes to the IMF.

Regarding Venezuela specifically, gold researcher Koos Jansen published his analysis on bullionstar.com  which showed firstly that the IMF published holding differed from that reported by the Venezuelan central bank by some 65 tonnes as far back as in November last year (See: Venezuela Exported Another 12t Of its Official Gold Reserves To Switzerland In February) and presumably the difference is now greater still.  So much for IMF gold reserve statistics for Venezuela alone.  How many more countries misstate their reserves in the interests of economic status and perception?

For some years there have, for example, been a considerable number of articles, admittedly written mostly by strongly pro-gold advocates, suggesting that the biggest gold reserve of all – that held by the USA of 8,133.5 tonnes – is bogus.  A link to a recent such is here: FORT KNOX Gold Paradox which sets out some of the thinking behind the doubts expressed over the U.S. gold holdings.  While some of the article is undoubtedly valid in terms of the anomalies in resisting any audit of the gold holdings, one of the reasons expressed for blocking such a Fort Knox audit – that “Fort Knox Bullion Depository is essentially empty of real gold – say it contains less than ten million ounces of gold but also contains perhaps 140 million ounces of gold plated tungsten”, is perhaps stretching the bounds of credibility a little too far.

But is this just the tip of the iceberg?  Gold could be beginning to play an advancing role in the global economic system – at least mega powers Russia and China appear to believe so, among others.  And they may be two of the players who might contribute most strongly.  Both are announcing official purchases of gold month in-month out to try and build their reserves but both have a huge way to go before they match those of the world’s top gold holders – the USA, Germany, Italy and France – and as a proportion of their forex reserves gold still accounts for only just over 15% for Russia and a minute 2.2% for China.  That compares with over 75% for the USA, 69% for Germany, 63% for France and 68% for Italy – at least on the figures as reported to the IMF.  For the latest IMF Official Gold Holdings click here.)

But as will be pretty obvious to most of our readers, so much financial data put out there is at best mostly misleading and at worst totally dishonest.  In today’s financial world it is perception which rules and it is almost certainly in a country’s interests (at least among the major gold holders) to keep their gold reserves as looking as strong as possible.  A bit of statistical manipulation, or even misreporting, may help them achieve this aim and keep all appearing well on the financial and economic fronts.

Global gold demand down 12% Q2 2015

The latest run of statistics from the World Gold Council has been released in the form of its Q2 Gold Demand Trends analysis with data nowadays being provided by London-based precious metals consultancy – Metals Focus.  While it finds that global demand is down 12% year on year it notes that there is a good likelihood that demand will pick up well in the second half – indeed the latest gold price moves and figures for Indian imports and SGE withdrawals suggest that this may already be happening.  On the Fundamentals front it also noted that supply was down 5% with an increase in mine supply being more than countered by a fall in gold scrap supplies. Central bank purchases were down year on year but still remained strong with the Q2 figure up on that for Q1.

The World Gold Council’s own release on the latest figures, with links to the full report, follows:

The World Gold Council’s Gold Demand Trends report for Q2 2015 shows total demand was 915 tonnes (t), a fall of 12% compared to the same period last year, due mainly to a decline in demand from consumers in India and China. However, demand in Europe and the US grew, driven by a mixture of increasingly confident jewellery buyers and strong demand for bars and coins. Looking ahead, there are encouraging signs moving into what are traditionally the busiest quarters for gold buying in India and China.

Overall jewellery demand was down 14% to 513t, from 595t in 2014 due to falls in consumer spending in Asia. In China, slowing economic growth and a rallying stock market led to a 5% fall in demand to 174t. In India, the heavy unseasonal rains in Q1 and drought in Q2 impacted rural incomes and affected gold demand. In addition, a dearth of auspicious days for marriages in Q3 meant that wedding-related demand was unusually slow, leading to a fall in jewellery demand of 23% to 118t. Overall, if we look at the picture for the first half of this year in India, jewellery was down 3% to 268.8t from 276.1t (H1 2014). The US remained steady, with jewellery demand up for the sixth consecutive quarter by 2% (26t). In Europe demand was also up, with Germany up 7% and the UK and Spain both growing by 6%.

Global investment demand was down 11% to 179t from 200t in Q2 2014. India was the main driver of the fall, down 30% to 37t, due to uncertain price expectations and a buoyant stock market. This was countered by a rise in Chinese bar and coin demand, up 6% to 42t. In Europe, fears of a potential Greek exit from the eurozone saw retail investment in gold reach 47t, a rise of 19% compared to last year. The US also saw strong demand, with retail investment increasing by 7%. Of particular note was the huge burst of activity in June, when bullion coin sales by the US Mint hit a 17-month high.

Elsewhere, central banks continued to be strong buyers of gold. Net official sector purchases totalled 137t, with Russia and Kazakhstan the biggest purchasers. Although a year-on-year fall of 13%, buying increased by 11% when compared with the first quarter of this year. It is the 18th consecutive quarter where central banks were net purchasers of gold.

Total supply was down 5% to 1,033t, as an increase in mine production of 3% to 787t in Q2 2015 was offset by declining recycling levels – down 8% to 251t. The indication for H2 2015 is that mine production will slow as the gold mining industry continues to manage their costs and optimise operations in the face of challenging markets.

Alistair Hewitt, Head of Market Intelligence at the World Gold Council, said:

“It’s been a challenging market for gold this quarter, particularly in Asia, on the back of falls in India and China. The reverse is true for western jewellery markets, as increased economic confidence led to continued growth in consumer demand. It is  fair to say that investment demand for the quarter remained muted given the continuing recovery in the US economy and booming stock markets in India and China during the quarter. 

Jewellery market prospects look healthier for the remainder of the year with the upcoming wedding and festival season in India. In addition, falls in the gold price have historically triggered buying in price sensitive markets and we are already seeing early indications of this across Asia and the Middle East. Conversely, sharp falls in Chinese stock markets have shaken the largely consumer investment base and we are seeing early indications of interest in buying gold again – all illustrating the unique self balancing nature of gold demand and the diverse drivers which underpin it.” 

Gold demand and supply statistics for Q2 2015

  • Overall demand was down 12% in Q2 2015 to 915t compared to 1,038t in Q2 2014.
  • Total consumer demand – made up of jewellery demand and coin and bar demand – totalled 715t, down 14% compared to Q2 2014.
  • Global jewellery demand was 513t, down 14% compared to the same period last year, due to falls in China, down 5% to 174t, as well as India, down 23% to 118t.  The US and Europe saw continued growth with the US up 2% to 26t, and Europe up 1% to 15t.
  • Total investment demand was down 11% to 179t, compared to 200t in the same quarter the previous year. Demand for bars and coins saw a 15% drop to 201t from 238t  the previous year, as the sector was affected by an expected increase in US interest rates and a continued shift towards other asset classes, notably equities. ETFs saw outflows totalling 23t, lower than the outflows of 38t seen in the same quarter last year.
  • Central banks continued to be strong buyers of gold, accounting for 137t in Q2 2015, slightly down on the equivalent quarter last year, but up 11% compared to the previous quarter. It was the 18th consecutive quarter where central banks were net purchasers.
  • Year-on-year quarterly mine production increased 3% to 787t in Q2 2015, against 763t in Q2 2014. Recycling levels were down 8% year-on-year to 251t compared to 273t in Q2 2014, resulting in total supply falling 5% to 1,033t.

The Q2 2015 Gold Demand Trends report, which includes comprehensive data provided by Metals Focus, can be viewed athttp://www.gold.org/supply-and-demand/gold-demand-trendsand on our iOS and Android apps..

You can follow the World Gold Council on Twitter at @goldcouncil and Like on Facebook