Physical gold demand strong with Central Bank and Asian purchasing

While the US dollar gold price may suggest otherwise it looks as though physical gold demand may be running at record, or near record levels, but still the gold price drifts, although is currently back off its bottom – but for how long?  Click here to read my latest article on Sharpspixley.com   which discusses this apparent anomaly, but one that has been prevalent pretty much since April 2013

The World Gold Council has, for example, just reported the second highest ever quarterly central bank purchases (although to be honest this conclusion could be described as  a little misleading as pointed out in the Sharps Pixley article linked above) and strong retail demand elsewhere.

Meanwhile the Shanghai Gold Exchange has been reporting huge new record physical gold deliveriess (this year’s to date figure has already exceeded the full year SGE deliveries record of 2013 and already is some 366 tonnes higher than at exactly the same time in 2013.

As we note in the article there are differences of opinion on the exact correlation between SGE deliveries and what is classified as Chinese gold demand – largley due to the classification of what actually comprises ‘demand’ or ‘consumption’ but as a like-for-like indicator of what is happening in China in comparison with prior years one cannot ignore the SGE statistics – and the mainstream analysts do not dispute that 2013 was the record year for Chinese gold consumption.

And in terms of global gold consumption it is still China and India which between them hold the key. China is rebooting its economy but as was seen in the absolutely enormous recent  ‘Singles Day’ (dwarfing those of the U.S.’s Black Friday and Cyber Monday put together – see Chinese Singles Day Sales Eclipse Black Friday And Cyber Monday Combined …) the purchasing power in the hands of China’s ever growing consuming classes is already absolutely huge and growing at perhaps 5-6% a year.  There is also a propensity for buying gold so we are entering an era where Chinese gold purchasing alone will probably start to exceed total new supply.  And Indian demand remains huge too – and again with a potential economic growth potential which greatly exceeds anything in the West. If the Modi Government can deliver on its promises, then demand growth here could start matching that of China – although the Indian intelligentsia have their doubts as to whether Modi is anything more than a consummate politician and thus a master of spin to match many of his Western counterparts!  (This is being written from India and the comment comes from conversations with Indians from Modi’s own state of Rajasthan).

However, how long gold prices can continue to move downwards under a massive, and ever-continuing, Sino-Indian growth scenario, remains the $64,000 question!

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China gold demand so far this year has already beaten previous full year record

With around seven weeks of purchasing still to go in 2015, gold deliveries out of China’s Shanghai Gold Exchange (SGE) so far this year have already shot past the 2013 full year record and are heading towards beating the full year total by a massive 400 tonnes or so.  The latest week’s withdrawals figure out of the SGE for the week ending November 6th came out at 44.9 tonnes bringing the total for the year to date to 2,210 tonnes.  In the previous full year record for SGE deliveries (in 2013) the total for the full year was 2,181 tonnes so year to date the flow of gold through the SGE is already some 366 tonnes ahead of the record 2013 year at the same stage.  With gold demand in China currently reported as being particularly strong given the weakness in the gold price proving attractive to Chinese consumers, we see no reason why the full year total should not end 400-450 tonnes higher than in the previous record year.

To read more on this do click on my article on this on Sharppixley.com – China gold demand already passes 2013 annual record.

Another 46.6 t delivered from SGE. A massive 2165t withdrawn YTD

While the frenetic pace of the gold deliveries out of the Shanghai Gold Exchange has slowed a little following the Golden Week holiday last month, they are still continuing at a weekly rate which, if continued for the rest of the year, will bring total withdrawals for the full year to over 2,600 tonnes – a massive amount and comfortably in excess of the 2013 record of 2,181 tonnes. Indeed the 2013 total will almost certainly already have been exceeded this past week  – a full eight weeks before the year-end – with these figures to be announced next Friday.

We think that 2,600 tonne plus estimate above will actually be exceeded as, historically, Chinese demand tends to pick up again as the Chinese New Year – with  its associated gift giving – approaches as jewellers and other fabricators stock up to meet anticipated demand.

Latest gold export figures from Hong Kong to mainland China are also running strong with a net 97.242 tonnes delivered to the mainland by this route in September.  Hong Kong remains almost certainly the biggest conduit for Chinese mainland gold imports, but is no longer so dominant that flows via this route can be taken as a proxy for total Chinese demand – but certainly still remain a significant indicator. (See: August UK gold exports direct to mainland China dwarf Hong Kong)

Interestingly even the mainstream analysts, who seem to downplay Chinese demand figures, do seem to be coming round to the recognition that Chinese retail demand is again picking up.  We are pretty sure they will end the year confirming that China remains the world’s biggest gold consumer again thus beating demand from India, which itself also seems to have been picking up again this year.  Whether this will be adversely affected by Prime Minister Modi’s gold monetization schemes remains to be seen, but we suspect that any effect will be insignificant – at least initially.

Indian gold imports 730 t YTD.  So is it really top consumer?

 

India has now released its official figure for gold imports in August.  Prior non-official estimates had put this at 140 tonnes and the official figure is a close 138 tonnes.  Now we also have an unofficial estimate for September of a significantly lower 67 tonnes and while some have seen this as an indicator of Indian gold imports tanking – if one looks at the latest chart from Nick Laird’s Sharelynx.com site showing month by month imports for the past five years up until August, one can also see that Indian monthly import figures are hugely variable and 67 tonnes is actually a reasonable figure and certainly doesn’t yet suggest that demand is particularly weak given the very strong August figure – the fifth highest in the past five years….

To read the full article which has been published on the Sharps Pixley , click on LAWRIE WILLIAMS: Indian gold imports 730 t YTD. So is it really top consumer?

What is China’s real gold demand?

There is a huge disparity between what the Chinese Central Bank apparently sees as gold demand and that estimated/calculated by the global analytical community. The figures seem to be continually diverging and here we utilise known official data to draw our own conclusions as to what the real figures might be.

As a base we are assuming that supply to the market is roughly balanced by demand.  There is an element of well substantiated data from Chinese and non-Chinese sources available which may give us a fairly good idea of the minimum supply levels potentially available to Chinese consumers. But given China’s non-reporting of direct gold imports this certainly does not present anything like a full picture.

First we have China’s domestic gold output which this year is estimated to reach perhaps 480 tonnes. Secondly we have net gold imports via Hong Kong. The Hong Kong Statistical office reports these on a monthly basis in a throwback to the Special Administrative Region’s former British-based bureaucracy, and net exports from this source to the Chinese mainland by the end of August totalled 485 tonnes, and given the tail end of the year usually produces some strong figures, a conservative estimate for this year’s total net gold imports from Hong Kong would be around 650 tonnes.

But there’s more. Switzerland exports gold both to Hong Kong and directly to mainland China, as does the UK. Recent changes in China’s permitted import routes for gold also mean that nowadays an important part of the gold exports from these countries does go directly to the Chinese mainland, bypassing Hong Kong altogether. For example, the UK started exporting gold directly to mainland China from April last year and through to the year end sent a little over 110 tonnes by this route. This year, after zero exports in January and February, it has exported around another 110 tonnes in the following four months to end June so it would not be unreasonable to assume that around 250 tonnes, perhaps more, will flow by this route into mainland China over the full year.

Likewise Switzerland has exported a little over 145 tonnes of gold directly to the Chinese mainland in the seven months to end July this year – again suggesting a full year total of around 250 tonnes.

So, if we add together the total of net projected Chinese gold imports for FY 2015 from Hong Kong, Switzerland and the UK and add in China’s own estimated domestic production for the year we are already seeing a total of 1,630 tonnes. Add to this unquantified direct imports from other nations and additional supply from domestic scrap we are probably coming up with a figure of perhaps closer to 2,000 tonnes, which is far nearer the SGE withdrawals figures than the mainstream analysts’ figures might suggest.

The big question is, though, is a significant proportion of the Chinese available new gold supply going into the Central Bank rather than in to retail consumption? Chinese officials tell us that the People’s Bank of China does not source gold from the SGE – but the country is also currently announcing perhaps an intake of around 14 tonnes a month since it began reporting these figures 3 months ago. If this is indicative of likely central bank purchases over the full year then this would total around 170 tonnes, which presumably is coming from somewhere.

And western analysts are dubious about levels of Chinese government purchases of gold anyway, mostly assuming them to be far higher than officially stated with gold being held in other government accounts not reported to the IMF. Additional monetary gold, which is not reported in export statistics from countries like the UK, could also be going to China directly – see Koos Jansen’s latest article on this: The London Float And PBOC Gold Purchases.

If we ignore for the moment possible direct imports by the PBoC, the amount of available ‘new’ gold to the Chinese market would be the 2,000 tonnes estimated above and the analysts’ estimates of Chinese gold consumption currently of around less than half this level leaves ca. 1,000 tonnes plus of supplied gold unaccounted for, some of which may be going into the financial sector, which does not tend to be recorded in analysts’ figures for consumption. But again this is probably a relatively small amount. So the question is where is this excess gold all going? This suggests the analyst figures are substantially under-estimating true Chinese consumption. With the SGE figures indicating an even wider discrepancy there are even more questions about total Chinese gold inflows unanswered. Perhaps there are indeed elements of double counting in the SGE figures, but probably not sufficient to account for the huge differences being seen.

But whatever the real figures are, known gold exports into China plus the country’s own production, account for probably at least 50% more gold than the analysts reckon China is consuming – and these totals almost certainly under-estimate the true picture. And what matters to the gold marketplace in terms of supply/demand fundamentals is the total amount of gold flowing into China from the West – not just whatever the analysts classify as consumption.

The COMEX Warehouse situation: While there may indeed be no shortage of physical metal in the overall COMEX gold warehousing system, the registered stocks (i.e. immediately available amount of physical metal) have indeed diminished and are currently down to around 5 tonnes only. As Jeff Christian has pointed out recently, though, this low number is not an immediate cause for concern as COMEX is primarily a futures market and little actual physical gold passes through it, while there are still big ‘eligible’ stocks held by the bullion banks some of which could be transferred to meet commitments if necessary. But the low registered stock level is yet another probable indicator of continuing gold flows from West to East. It should also perhaps be pointed out that the numbers here are actually quite small compared with overall gold trade with the total fall in eligible plus registered stocks only down around a little over 30 tonnes year to date. Given continuing gold inflows into the COMEX warehousing system, of course, the total gross outflow will have been considerably higher, but reports of a pending supply squeeze should perhaps be disregarded given the overall total holdings of eligible plus registered stocks in the COMEX warehouses.

CORRECTED: Staggering August Chinese gold deliveries out of SGE

Correction to total SGE withdrawals for August – these had previously been overstated

With recorded deliveries of just under 60 tonnes in the final week of August, the Shanghai Gold Exchange statistics would seem to disprove general media reports that Chinese gold demand is falling.  The week 34 figures (up to August 28th) bring SGE withdrawals for the month to a staggering 302 tonnes (with one trading day to go).  This is already a new monthly record and what is even more significant is that August is usually one of the weaker months of the year for SGE deliveries.  To put this figure into context, the world’s second largest gold producer, Australia, mined 272 tonnes of gold last year, so the SGE delivered nearly 50 tonnes more than this out of the exchange in a single month.  And don’t forget the SGE only deals in physical gold – there’s no paper gold element involved.

Year to date SGE figures show that physical gold withdrawals out of the Exchange are already running hugely ahead of those at the same time of year even in the record 2013 year for Chinese gold demand.  Indeed withdrawals are running fully 219 tonnes higher than by the end of August 2013.  With Chinese demand usually stronger in the tail end of the calendar year, particularly in November and December as the Chinese New Year – a time when domestic gold consumption normally is at its highest – approaches, it does currently look as if we will see a huge new record in the SGE figures this year.  This just doesn’t gel with the general position on Chinese demand as expressed by the media.

Gold price under pressure in absence of Chinese demand

On Thursday New York closed at $1,125.40 down $8.20. The dollar was stronger at $1.1140 down from $1.1335 at the close, against the euro, with the dollar Index stronger at 96.34 up from 95.91 yesterday. The LBMA gold price was set at $1,125.00 down $5.05 today. The euro equivalent was €1,010.01 up €3.15. Ahead of New York’s opening, gold was trading at $1,123.30 and in the euro at €1,008.62.  

The silver price closed at $14.69 the same as yesterday’s close in New York. Ahead of New York’s opening today it was trading at $14.68.

Price Drivers

New York continues to push the gold price down in the absence of Chinese demand. We note that silver is not following this path but is moving to a very tight trading band usually synonymous with behavior ahead of a strong move either way.

With the employment figures about to be announced in the U.S. later today markets are bracing to move on their release. A figure of 220,000 is expected. Lower than 200,000 would disappoint, but over 220,000 would see a September interest rate hike move into view, according to the markets. We note that the Fed was clear that they are looking for upward pressure on wages and inflation so that they are certain the recovery really has gained traction and the prospect of 2% inflation is coming into view. But the most important feature for gold is the impact on the dollar today’s announcement will have. If the dollar is stronger [while China is closed] there will be downward pressure on the gold price again, today.

But with China back in the gold business from Monday on, we expect upward pressure to return to the gold price.

The announcement from the E.C.B. yesterday confirmed that they were willing and able and implementing more Q.E. This was the main reason for the fall of the euro. But the fall was limited to 1 cent against the dollar, far less than we think the E.C.B. wanted. The E.U. would love to see the euro trading at parity with the dollar, but it is doubtful that the U.S. would want that. We don’t see Q.E. as the panacea for a recovery in the E.U. It may even have ‘shot its bolt’ already. If Q.E. has failed to do it by now with a weaker euro, why should another dose do it? There were no purchases or sales from or to the SPDR gold ETF or the Gold Trust, yesterday. This leaves the holdings of the SPDR gold ETF at 682.595 tonnes and 161.14 tonnes in the Gold Trust.

Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com

My articles on palladium and gold on Sharps Pixley and Biznews

As most readers of lawrieongold may already be aware I am now writing on precious metals for Sharps Pixley in London and Biznews in Johannesburg.  Links to my most recent posts on these websites follows:

Palladium no beneficiary of recent gold price rise

Latest SGE deliveries enormous: Physical gold may be nearing crunch point

Gold stock investors following the ‘wrong dollar’

 

 

65 tonnes out of SGE: Another enormous week for Chinese gold demand

Another week’s gold withdrawal figures from the Shanghai Gold Exchange (SGE) and it appears that the demand momentum is holding up – if not accelerating.  The latest figures are from the week ending August 14th with the Exchange reporting flows of 65.3 tonnes out .  This is an enormous figure for an August week when historically Chinese demand is usually at its lowest and follows several weeks of plus 50 tonne withdrawals at a time of year when 30 tonnes would normally be seen as a strong figure.

There are reports that demand has slowed over the past week given the recent recovery in the gold price, with Shanghai premiums falling accordingly, so the next week’s withdrawal figures will be viewed with additional interest to see if this really is the case, or whether Chinese overall ‘demand’, as expressed by SGE is still holding up well.

The latest figure for total SGE withdrawals for the year to date is now a massive 1,585 tonnes, fully 161 tonnes more than in the record 2013 year at the same time – see www.sharelynx.com chart below.  A quick calculation of SGE withdrawals to date (close to 50 tonnes a week so far this year), if extended over the full year would suggest a total figure for 2015 at over 2,500 tonnes – hugely higher than the record 2013 figure of 2,181 tonnes.  While one should perhaps regard a continuing weekly withdrawal rate of 50 tonnes as being an optimistic projection, it is also worth bearing in mind that SGE withdrawals are usually far stronger in Q4 than in Q3!

sge32

With the Chinese Central Bank now reporting its own monthly gold accumulations – 19 tonnes in July and these apparently are additional to the SGE reported figures, and Russia continuing to expand its gold reserves – another 12 tonnes in July – and Indian imports rising sharply according to latest Swiss gold export data, global physical gold demand appears to be running well ahead of new mined supply, although whether that makes any difference at all in a paper-gold futures led market is perhaps doubtful.  But with fear stalking the Dow after a huge week of falls (around 530 points on Friday alone), and general stock market indices around the globe  a sea of red, maybe at last gold sentiment is beginning to get a safe-haven boost with worries about a general worldwide stock market meltdown.

Chinese gold demand still running extremely high for Summer months

Contrary to some of the expressed media-disseminated information Chinese physical gold demand, as indicated by gold withdrawals from the Shanghai Gold Exchange (SGE), remains at a very high level indeed for the time of year.  The latest figure for withdrawals for the week ended August 7th was 56 tonnes, bringing the total for the year to date to a massive 1,520 tonnes.  This is a full 135 tonnes higher than the previous record for Chinese gold demand at the same time of year – back in 2013.

A particular feature of this year’s SGE withdrawal figures has been the continuing strength of demand so expressed through the Summer months when demand normally falls away.  This year weekly demand over the period has been mostly above the 50 tonne mark – indeed it was well over 70 tonnes just three weeks ago – and this is at a time of year when 30 tonnes plus normally represents a strong demand week on the SGE!  See chart below from www.sharelynx.com.

sge aug 15

If one checks out the weekly withdrawals bar chart (the lower section) one can see just how strong recent movement through the exchange has been in comparison with previous years.

Interestingly the Chinese Central Bank – the Peoples Bank of China (PBoC) – has also now started to report monthly updates in its gold reserves (see China gold reserves up 19 tonnes in July. Really?!) which could be seen as adding to overall Chinese demand, although many Western analysts are unconvinced about the accuracy of PBoC statements regarding the size of the nation’s real gold reserves.

The big question may well be has the recent devaluation of the yuan against the dollar, coupled with the admittedly fairly small gold price recovery to date, started to redress sentiment in the gold market in the West where prices are set.  There is news now of some of the big bullion banks taking deliveries of physical gold on their own account, and also of shortages of registered gold available for delivery in COMEX warehouses having to be ‘rescued’ from dangerously low levels by a major reclassification of a big hunk of gold from the Eligible to the Registered category by JP Morgan.  Is the tide turning at last?  This could presage a very interesting second half of the year in the gold markets of the world.

 

Enormous physical gold demand on at least three continents

Contrary to some reports of poor physical gold demand, the latest gold price falls seem to have yet again stimulated big demand on at least three continents.  It may have already led to arresting the recent price falls but can it do even better for gold?

In the US very strong gold coin sales have been reported by the US Mint.  In China the latest reported week of Shanghai Gold Exchange withdrawals were simply enormous for the time of year.  India too is reported to be seeing strong demand at the lower prices.  And in Australasia the Perth Mint has stated that it has been unable to keep up with demand.  No doubt European demand for physical gold in coin and bar form will also be running very high, although we haven’t seen any official figures to confirm this yet.  Perhaps the physical demand is at last leading to shortages of available gold and pushing prices higher again – or at least arresting the fall – despite virtually every mainstream gold analyst talking the gold price down.  Indeed many bank analysts have been suggesting falls of $100-$200 or more from the current gold price level. It would be a brave financial analyst to see things differently in the face of consistently negative forecasts from virtually all his/her peers.

Let’s take the US Mint’s gold coin sales figures first.  Announced July figures show that the Mint sold a very large 202,000 ounces (6.28 tonnes) in gold coins – the highest figure since April 2013 and the third highest monthly total ever.  Demand certainly seems to have been stimulated by the lower gold price which dropped below $1,080 an ounce on the spot market at one stage.  Gold closed at $1,095 an ounce this weekend.  And silver coin sales were also huge – particularly given that the Mint suspended sales for nearly three quarters of the month due to lack of sufficient supplies – at 5.53 million ounces.

In China, the latest reported week of flows out of the SGE – the week ended July 24th – also saw the third highest weekly gold withdrawal figure on record at 73.3 tonnes – and this at a time of year when Chinese gold demand is usually at its weakest with normal levels less than half those announced.  In short it was thus a phenomenal week on the SGE, even if not a record.  As we always point out there are arguments put forward against SGE withdrawals correlating to Chinese demand, the latest argument against coming from GFMS in its Q2 gold report, suggesting (See Mineweb article: GFMS ‘curate’s egg’ gold report) that this has been down to ‘cash-strapped Chinese jewellery fabricators having to offload their inventories at attractive discounts, either to their competitors or directly to smelters. They then refine the gold pieces into bars and eventually this will flow back to the SGE, helping to inflate SGE its turnover by comparison with physical offtake. Whether there is concrete evidence of this, we don’t know.’  Be this as it may, SGE withdrawals, however they are made up, are a great indicator at least of overall Chinese demand and sentiment towards gold, as well as indicative of the huge gold flows into the Asian Dragon.  Even in an economic downturn China remains a hugely significant market for physical gold.

In Australia, the Perth Mint which does significant trade in gold and silver bullion coins and bars, and has been doing so for more than 100 years, says it is having trouble keeping up with demand, the restriction being the amount of unrefined gold coming in from the mines – and don’t forget Australia is the world’s second largest gold producer after China.  Nigel Moffatt, the Pert Mint’s Treasurer, has recently said on Bloomberg’s TV channel, “everything we get in is going straight out the door as soon as we refine it.”

India has just published its May gold import figures and this was back to 2011 and 2012 levels – a year when it was arguably still the world’s largest gold consumer.  May imports totalled 96.1 tonnes  excluding smuggled gold which reports suggest may have been running at significant levels given the 10% import tariff remained in place.  Taken together with China’s gold demand as represented by SGE May figures volume for these two countries alone for the month came to 296.55 tonnes according to Nick Laird’s sharelynx.com website , which monitors a huge amount of data and presents it in graphical form – comfortably more that the world’s total new monthly mined gold production that month which will probably have totalled around 270 tonnes.  (See GFMS reservations about SGE withdrawal figures above)

So, we’ve covered demand in Asia, North America and Australasia.  One doubts that the phenomenon is absent in Europe.  The Greek effect may not yet be over and in the past, the Germans and austrians have tended to generate strong demand in times of economic uncertainties and these are continuing within the Eurozone.  The low gold prices will probably have also stimulated demand – we do see evidence of this in statements from bullion dealers.  While mainstream analysts may be looking for further sharp falls, but the old adage ‘buy when there’s blood in the streets’ may well be coming into play.  Maybe we haven’t reached the bottom yet.  Thoes using the futures markets to drive prices lower may not have exhausted their ammunition yet, but someone out there does appear to be trying to stabilise the markets.  Julian Phillips, writing here, has suggested it might be China.  Given that it has been encouraging its citizens to buy precious metals, the Chinese government  may be keen to prevent further drastic falls, just as it has appeared to intervene to halt the recent stock markets crash there.

Perhaps gold is bouncing along the bottom.  This is generally a quiet time of year for the precious metals markets – so maybe we will get a better indication of where gold and silver are heading when New York’s bankers and institutional managers get back from sunning themselves, and from whatever else they get up to, in the Hamptons or further afield.  We’ll no doubt start to see in just over a month’s time.  Until then opportunists may try to take advantage of thin markets so we could be in for a month of price volatility.  Fed interest rate raising may be a bit of a red herring – surely this has been built into the price decline already?  It certainly should have been.  But all the time physical gold is flowing East

Chinese and Indian gold price premiums on the rise.  Gold coin buyers rampant!

New York closed at $1,093.90 down $6.30 after closing at $1,100.20 on Tuesday. This morning in Asia the gold price rose back to $1,097 before the LBMA gold price was set at $1,101.65.  The dollar was weaker at $1.0996 after yesterday’s $1.0940 against the euro, with the dollar Index down to 97.03 from 97.28 yesterday. The euro equivalent was €1,001.86 down from €1,002.74 yesterday. Ahead of New York’s opening, gold was trading in London at $1,101.80 and in the euro at €1,001.73.

The silver price closed at $14.80 down 1 cent in New York. Ahead of New York’s opening it was trading at $14.87.

The ‘bear raid’ continues with another 2.384 tonnes of gold sold from the SPDR gold ETF on top of the  16 tonnes sold since Sunday night. The Gold Trust saw sales of 0.48 of a tonne yesterday. But there is a difference today. The impact on the gold price was zero as the gold price rose back to $1,097 in Asia. The holdings of the SPDR gold ETF are at 687.309 tonnes and 167.28 tonnes in the Gold Trust.

Retail demand in China is now jumping as it is in India, but it has still to reflect in London’s demand. The price rise in London was mainly due to a weaker dollar. But in both India and China premiums are rising with sales doubling in Hong Kong. Retail demand in these countries needs to feed through to Shanghai before we see this demand damage the ‘bear raid’.

One cannot know if the bears will continue their raids or how much gold they have to orchestrate their raids. The triggering of ‘stop loss’ protections has happened but will not continue unless more raiding takes place. How much demand will come from Asia now that it is picking up is key but if it matches the gold arbitraged into China, then the bears will have to cover their short positions. When we have more information we will be able to see where gold and silver are going. Gold coins buyers are rampant!

Many feel gold could have had its day, but such views are not those of long-term investors or central banks. With Russia continuing to build its gold reserves buying in its own production it is removing this supply from the global market, much as we believe China is doing. Kazakhstan takes all its local production into reserves and has done for years now. This adds to the reality that market prices in New York and London do not reflect global demand.

Silver ignored gold’s fall below $1,100 and has done so on its rise back there again. Investors should again ask why?

Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com

China hits new record H1 SGE gold demand figure

Latest figures out of the Shanghai Gold Exchange show that Chinese H1 gold withdrawals are running even higher than in the record 2013 year.

With a latest week (to June 26th) total of 46.167 tonnes of gold withdrawn from the Shanghai Gold Exchange – again a high level for the time of year – the total for the year to date has reached a massive 1,162 tonnes and assuming withdrawals from the SGE have continued at around the same rate in the final two trading days of the month, we can probably add another 18 tonnes to make gold demand for the full six month period, as represented by SGE withdrawals, 1,180 tonnes.  This will be comfortably a new record for the first half of the year – the previous record was in  2013 with just under 1,100 tonnes withdrawn in H1 and when the full year figure was 2,197 tonnes.

Consider that total global new mined gold supply for the half year period will have been only around 1,600 tonnes that gives a pretty good idea of the significance of Chinese gold demand in the world picture – accounting for around 74% of new primary supply on its own.  And China only accounts for less than half of global gold demand.  Lowish gold prices mean that recycled gold supply is weak and so far this year liquidations out of the gold ETFs are small in comparison to the previous two years.  And what is apparent is that Chinese demand continues to grow – and anecdotal evidence suggests that this is receiving a further boost as Chinese investors turn back to gold following a huge crash on the overbought Chinese stock markets.

There has thus been a huge demand for gold in China over the past three years in particular.  (See the chart below of weekly SGE withdrawals since 2010 from www.bullionstar.com website’s long term SGE gold withdrawals chart).  2013 was a record year for SGE trade and 2014 only a little smaller, and given that H2 SGE withdrawals tend to exceed the H1 figures in total, we could well be heading for a substantial new annual record, confirming the overall upwards trend.

bstar weekly

Koos Jansen, in his latest bullionstar.com blog, expresses considerable surprise that global financial turmoil, as overtly expressed by the ongoing Greek tragedy and the Chinese stock market collapse, and uncertainty on western markets too, has not led to a gold price surge.  “This smells like market rigging.” he writes. ”Surely the last thing the authorities need at this moment is gold on the move. Various media and bullion dealers report demand for physical gold in Europe is strong.”  Add to this something of a resurgence in demand from the world’s other massive gold consumer – India – and an apparent recovery in demand for gold and silver bullion coins in the U.S. and Europe alongside the Chinese demand noted above and indeed it is surprising that gold has been falling regardless.

 

As usual the media puts this down to the prospect of the U.S. Fed raising interest rates sooner rather than later, but by now this prospect should have been taken into account anyway in gold pricing given that the Fed will only implement a very cautious policy and, at least initially, rates are likely to remain effectively negative after any initial rises.  As we have said before there appears to be a concerted campaign to play down gold’s potential as a significantly rising gold price would indicate a loss in confidence in global fiat currencies, and governments and central banks can’t afford for this to happen and will doubtless continue to brief against it.

SGE gold withdrawals – a massive 54 tonnes in latest week

As we have reported here, Shanghai Gold Exchange withdrawal figures are currently running very significantly higher than usual for the time of year, contrary to much mainstream media comment that the Asian dragon’s gold demand is weakening.  The latest week (to June 19th) for which figures are available show SGE gold withdrawals at 54 tonnes at a time of year when they would normally struggle to reach even 30 tonnes – See the lower section of the chart from Nick Lynn’s www.sharelynx.com and www.goldchartsrus.com websites published below.

SGE week 24

SGE withdrawals for the year to date have now exceeded 1,115 tonnes with a further week and two business days to go before the end of the period.  The half year total thus looks like reaching over 1,150 tonnes – not bad for a nation where the mainstream press keeps on telling us demand is weak and that China is being overtaken by India again as the world’s biggest gold consumer.

Weak demand had been put by the press down to the perhaps excessive rises in the stock markets enticing Chinese investors away from gold – but there was actually little indication from the SGE figures that this was indeed the case.  But now with the stock market turning down very sharply it does look as though gold may be benefiting.  Anecdotal reports also tell us that gold premiums in Shanghai have been strong, but at a time of year when gold demand is normally at its nadir.

China gold demand robust, India muted; Greek tragedy may be ending

Julian Phillips’ appraisal of what’s happening in the gold and silver markets.

New York closed at $1,193 down $9.10. We do not believe that this was to do with Greece. The gold price was set this morning at $1,193.70 with the dollar at $1.1354 slightly weaker than Friday and the dollar index stood at 94.19, not far different from Friday’s level. The euro equivalent was €1,051.35 down €7.55. Ahead of New York’s opening, gold was trading in London at $1,193.60 and in the euro at €1,051.68.

The silver price fell to $16.10 down 10 cents in New York. Ahead of New York’s opening it was trading at $16.17.

The gold price was strong towards the end of last week resting above $1,200 and now on $1,190. While it is still in no-man’s land, if anything it is pointing up, but we wait to see just how the precious metal’s market is going to react if there really is a conclusion to the tragedy. As you can see from above, the gold and silver prices have fallen back to where they rose from on Thursday. Short covering rallies are usually short-lived unless other factors contribute to the rise. In line with this the month end is coming up and positions are often closed then reopened in the new month.

Today marks the day when the Greek Tragedy is concluded, so we are told in the media. Greece has forwarded another set of proposals and the media is saying a deal is most likely today. We would prefer to keep quiet and see what happens. The market in gold and silver is doing just the same and marking time before we see a strong reaction.

With Greece making these last minute proposals, the E.U. is placed in a position that if it rejects them, the E.U. will look the villain. As this is primarily a political issue the markets are really waiting to see if the fat lady really is going to sing. The re-adjustment in prices today really illustrates that it is the dollar market that is dictating prices not the Greek situation. We don’t see Greece causing an effect until a conclusion is reached.

There were no sales or purchases of gold from or into the SPDR gold ETF but a purchase of 0.78 of a tonne into the Gold Trust on Friday. The holdings of the SPDR gold ETF are at 701.897 tonnes and at 167.01 tonnes in the Gold Trust.  Meanwhile, gold demand in China remains robust while demand in India is in its quiet time for the year. With urbanization continuing in India at a rapid pace, demand in this seasonally quiet time is higher than normal.

Julian D.W. Phillips for the Gold & Silver Forecasters – www.goldforecaster.com and www.silverforecaster.com

China gold demand picking up strongly this month

Contrary to a number of media reports telling us China demand for gold has collapsed, and also that premia on the Chinese gold markets have turned to discounts, the latest figures out of Shanghai belie these statements.  For the latest week for which figures are now available (ended June 12th) 46.151 tonnes of gold have been withdrawn from the Shanghai Gold Exchange – an extremely strong figure for a time of year when seasonality of demand tends to see withdrawals in the high 20s or low 30s of tonnes – see the excellent chart of weekly withdrawals from Nick Laird’s Sharelynx.com website from 2009 to date below:

SGE week

 

The latest withdrawal figures suggest that Chinese gold demand as indicated by the SGE figures, is heading for a new record half year level of perhaps close on 1,150 tonnes – the levels are certainly running higher at the moment than they were in 2013 and 2014 – the highest years on record for SGE gold withdrawals.  And with the typical Chinese gold demand pattern seeing particularly high figures from about September onwards, portents are good for demand to surge yet higher again this year.

As we have pointed out here before there are arguments out there over whether SGE withdrawal figures represent Chinese total gold demand or not with most mainstream Western analysts coming up with much lower figures for Chinese wholesale gold consumption.  Koos Jansen of www.bullionstar.com, who follows these matters perhaps in more detail than anyone, is adamant that SGE gold withdrawals do approximate closely to real Chinese gold demand – and they certainly are at the very least a proxy for Chinese gold flows now actual import figures are clouded by the direct imports through centres other than Hong Kong, which are not reported by the Chinese authorities.  We have been calculating that perhaps around 40% of Chinese gold imports are now coming in directly rather than via Hong Kong which makes the Hong Kong figures, as reported by the mainstream media, no longer indicative of total Chinese demand.

So Chinese gold demand, as represented by the latest SGE figures, seems to be alive and surging – rather than at death’s door as most media headlines would have us believe.  Do read my article on Mineweb entitled Gold: The US sets the price but Asia does the buying for further thoughts on what I see as an enormous anomaly in gold pricing today.  It will be interesting to see if the Bank of China joining the LBMA price setting participants helps address this balance.