China’s SGE gold withdrawals YTD 25% down on 2015 but still in line with 2014

The latest announcement of gold withdrawals out of the Shanghai Gold Exchange, show something of a declining pattern month on month this year – and in cumulative terms are sharply down (25%) on the record 2015 withdrawal figures, but pretty much still on par with 2014.

SGE withdrawals are one measure of total Chinese gold demand – but are seemingly discounted as such by the principal Western precious metals research consultancies which seem to categorise Chinese consumption using some quite rigorous parameters which some feel hugely understate actual gold flows into the Chinese mainland.  The consultancies’ figures even come in comfortably below known Chinese gold imports from countries which report these, and certainly take no account of additional supply from Chinese domestic gold production – currently around 450 tonnes a year.  It seems that flows into the Chinese commercial banking system for use as collateral and in other financial transactions, which are by all accounts quite considerable are ignored in the consultancies’ ‘consumption’ analysis.

Interestingly, the Chinese central bank, The People’s Bank of China (PBoC), equates SGE withdrawals with total Chinese gold demand, while the consultancies maintain there is a degree of double counting in the SGE figures.  But, whatever the truth of the matter, movements out of the SGE, looked at month on month and year on year, are certainly an acceptable indicator as to how overall Chinese demand is faring.

Shanghai Gold Exchange Monthly Gold Withdrawals (Tonnes)

Month 2016 2015 2014
January 225.08 255.42 246.00
February* 107.60 156.36 171.67
March 183.24 213.35 146.56
April 171.40 195.45 129.59
May 147.28 162.15 129.34
June 138.51 195.67 128.03
July 117.58 285.50 137.53
August   265.27 161.95
September   259.98 202.43
October   176.29 201.11
November   202.71 212.49
December   228.21 235.66
Year to end July 1090.69 1,463.90 1,088.72
Full Year   2,596.37 2,102.36

Source: Shanghai Gold Exchange

*February withdrawals figures tend to be anomalously low due to SGE closure during the Chinese New Year holiday

As can be seen from the above table, last year’s record withdrawal figures were hugely boosted   by some very high monthly figures between July and the end of the year.  Past SGE withdrawals have tended to come in higher in the second half of the year, so subsequent monthly figures will be watched with interest to see if this kind of pattern continues in the current year, or whether Chinese demand remains depressed.  But it’s hugely unlikely that this year’s total will come anywhere near that of last year’s record.

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Check out my latest articles on falling Chinese gold demand

Chinese gold demand appears to be slipping so far this year according to the latest Shanghai Gold Exchange withdrawal figures.  Whether these are a true representation of total Chinese gold demand is the subject of some dispute – but as a trend indicator they are probably the best data available on a regular basis.  Check out my latest articles on this on sharpspixley.com and seekingalpha.com for more info:

SHARPS PIXLEY: China’s SGE gold deliveries down 17.7% ytd

SEEKING ALPHA: China Gold Demand Down Nearly 18% So Far This Year

 

China’s SGE gold withdrawals in April 171 tonnes

The latest announcement from China’s Shanghai Gold Exchange (SGE) shows that  gold withdrawals for April totalled 171.4 tonnes so remain subdued compared with the past couple of years.  For the first four months of the year 687.3 tonnes were withdrawn, very sharply below the 820.6 tonnes at this stage a year earlier (admittedly a record year) – representing a fall of over 19% year on year. However, even at the current lower monthly rate taken out over the full year this would suggest SGE withdrawals remaining at over 2,000 tonnes for the full year  Thus even at a lower level Chinese gold demand as represented by SGE withdrawals – although there are some arguments from top analysts that these overstate the nation’s true absorption of physical gold – do account for a very significant proportion of the world’s newly mined supply of gold – currently around 3,200 tonnes a year.

Indian gold imports have also been low in the first four months – initially due to demand being held back ahead of the late February budget in the hope of a reduction in import duties – and subsequently due to strike action by the jewellery sector disappointed that the duty cuts were not forthcoming.  Thus the recent performance of gold, given what has been a strong downturn in Asian demand, has been all the more remarkable.

To a significant extent growth in Western demand, represented by purchases into the major gold ETFs and strong buying of gold coins and investment bars has been making up a lot of the shortfall from Asia. The biggest of the gold ETFs, SPDR Gold Shares (GLD) for example, has added around 192 tonnes of gold so far this year alone. It is still hugely below its peak, but is currently back at a level last seen in December 2013 with holdings at the end of last week at 834.19 tonnes.  It has put on 30 tonnes since the end of April.  And according to Bloomberg i inflows into all the gold ETFs it follows totalled around 330 tonnes in Q1 alone.  It thus looks as though ETF inflows are taking up any slack represebted by what is very probably a temporary downturn in Asian demand and gold flows.

The other contributor to the strong price performance in terms of logistics rather than just sentiment is that physical gold actually appears to be in relatively short supply with available inventories falling in the USA and the UK, where most is held.  The head of one of Switzerland’s largest gold refineries recently told Jim Rickards of problems in securing sufficient supplies to meet demand.  With new mined gold supply almost certainly plateauing, and possibly even beginning to turn down, demand shortages could be exacerbated further.   A recent analysis by Paul Mylchreest, who many may remember as the author of the sadly missed Thunder Road Report also even suggests that the London Bullion Market may even be in deficit.

 

Chinese SGE gold withdrawals rise to 183.2 tonnes in March

For those avid watchers of the Shanghai Gold Exchange (SGE) withdrawal figures, those for the month of March came in at a respectable 183.2 tonnes – well above the rather abject February level (107.6 tonnes) which was kept down by the SGE’s closure over the Chinese Lunar New Year holiday, but well below that for January which saw a bit of a buying surge ahead of that holiday.  With Q1 gold withdrawal figures always affected by the timing of the New Year holiday period, which fell on February 6th this year, it is always difficult to draw any sensible conclusions as to what these early year figures mean in terms of likely total Chinese demand for the full year.

Looking at the total Q1 figure, this came in at 515.9 tonnes – 17.5% down on that for the Q1 figure for  last year when the full year total was a massive 2,596.4 tonnes, but it is a respectable figure nonetheless suggesting a full year total of over 2,000 tonnes for the fourth year in a row.

A big unknown here of course is how much the considerably lower growth in the Chinese economy, coupled with higher gold prices should they continue, or indeed rise further, will do for Chinese gold demand.  The Chinese are believed to be bargain hunters in terms of the gold price, climbing in when they perceive it to be weak – as witness the huge surge in demand in April 2013 when the gold price was knocked back very sharply indeed in the West, leading to what was then a big new record year for Chinese gold demand – since surpassed in 2015.

The performance of the Chinese stock markets will also be relevant – but whether the big fall from its peak last year (down over 40%) will encourage safe haven gold investment, or restrict demand because of loss of capital, is something of an unknown.  However fear of a possible gradual devaluation of the yuan against the US dollar as the country defends its export earnings, could well see a boost to gold demand.  We shall see.

For more analysis on the latest SGE figures click on Chinese gold demand picking up – 183.2 tonnes in March on sharpspixley.com

Gold and silver on pause – waiting for physical buying!

Gold TodayGold closed in New York at $1,199.60 but stood, in Asia, at over $1,212 this morning but then slipped back to $1,204 before London opened. Then the LBMA set it at $1,202 down from $1,212.00 down $10.00, with the dollar index stronger at 96.85 up from Monday’s 96.54.

The dollar is slightly stronger against the euro at $1.1144 up from $1.1171 on Tuesday. The gold price in the euro was set at €1,078.51 down from €1,084.95.

Ahead of New York’s opening, the gold price was trading at $1,207.40 and in the euro at €1,084.34.  

Silver Today –The silver price stood in Asia at $15.22.  Ahead of New York’s opening the silver price stood at $15.30.

Price Drivers

Tuesday saw no purchases or sales from or to the SPDR gold ETF or the Gold Trust, clearly waiting for gold to hit support. Their intention appears to be to buy at the best prices they can and not chase any price. The holdings of the SPDR gold ETF are now at 710.954 tonnes and at 179.19 tonnes in the Gold Trust. We don’t believe that after such strong buying investors have moved out of the market. We believe that they are readying to start buying the shares of the SPDR gold ETF soon.

China too appears to be waiting for the gold price to settle down, although while they could during the Lunar New Year holiday they piled into the shops to buy gold. Chinese demand remains robust. We also expect the post holiday fall-off in demand to be slight with lower prices and ongoing enrichment of the middle classes.

But yesterday saw the gold price hold lower levels because of the absence of gold ETF buyers in the U.S. Now that the gold price is bouncing off support at $1,200 we expect physical demand to come in again.

The media appears obsessed by growth in China and the Yuan exchange rate as though they are the factors hurting the developed world. We believe nothing could be further from the truth. China will internalize its debt problems and growth problems as they continue to change direction towards consumption and the development of the middle classes. It is a process the developed world has not seen since the Second World War. Such a process limits imports from the west.

Bear in mind the Chinese government rules the entire financial system there with an iron hand, unlike in the west. A 1% or 2% move, both ways this week, of the Yuan, are of no consequence!

The basic problem the developed world is facing is that global cash flow to itself is dropping over time from the 80% it enjoyed in 2000 to the eventual 35% in 2020. As of now its global cash flow is between 40% and 45% going to Asia and 55% to 60% to the developed world. The road forward is to see China and Asia producing all products that the west does, as well and cheaper.

China wants to become the No. 1 economy as independent of the Developed world as possible, to remove its vulnerability to it. This will divide the world and bring intense pressure on the developed world, long term. It is inevitable that this will bring additional financial and currency pressures to the globe.

With this in mind China is, through its citizens and institutions, buying as much gold as it can, as it foresees the day when gold will reinforce a failing global monetary system.  But even there, the government can, at the drop of a hat, confiscate the bulk of their gold. The Chinese are so obedient or fearful of government that they will hand in their gold if told to do so by government. Bear in mind too that Hong Kong is part of China.

Silver – The silver price is holding strongly above $15.00 and we expect will do so while gold is in this Technical pattern.

 

Julian D.W. Phillips

GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance

 

CGA figures equate Chinese domestic gold demand to SGE withdrawals

My latest article on sharpspixley.com.

It seems to take an awful long time for the publication to appear, but now the Chinese Gold Association (CGA) has published, in Chinese, its 2014 Gold Yearbook and its figures for China’s gold demand that year, and for China’s gold imports, differ strongly from those put out by major precious metals consultancies such as GFMS (which also provided data to the World Gold Council that year), Metals Focus (which is current data provider for the WGC), and CPM Group – the most prominent U.S. based precious metals consultancy.  The report on the latest CGA figures to be published came from who else but precious metals chart guru, Nick Laird of www.Sharelynx.com, who monitors China figures extremely closely, and who also published an image from the yearbook showing the actual table from the report

For 2014 for example, the WGC (whose figures seem to be taken as gospel by the world’s major media outlets) reported mainland Chinese gold consumption that year at 813.6 tonnes.  The CGA yearbook stated the total Chinese gold demand figure at 2,106 tonnes – which is actually extremely close to the Shanghai Gold Exchange (SGE) withdrawals figure for the same year at 2,102 tonnes.  (For 2013 CGA total demand figures were also almost identical to SGE withdrawal figures for that year.)   Now while the categorisation of what should actually be included in the WGC consumer demand figure may differ somewhat from what is included in the CGA total demand figure, the 2014 difference of 1,292 tonnes between the two sources stretches belief.  Either the WGC (using GFMS figures) got it hugely wrong, or the China Gold Association is including all kinds of things which the WGC isn’t in its calculations…….

To read the full article, which goes into more detail on Chinese gold data, click here

Update with chart: 2015 SGE gold withdrawals total 2596 t – 19% up on previous record year

The Shanghai Gold Exchange’s announcement of the full year figure for gold withdrawals for calendar 2015 show that a huge new record of 2,596.4 tonnes was taken out – 19% higher than the previous record of 2,182 tonnes recorded in 2013. This is just short of the 2,600 tonnes we had been estimating.  In the four days of trading in the final week of the year 40.94 tonnes were withdrawn – suggesting around 50 tonnes for a full 5-day week including Jan 1st – which is pretty much on par with other recent weekly withdrawal figures despite any minor disruption from the big Christian Christmas holiday period which has little, but possibly some very minor, impact on Chinese domestic trade.  This time of year does seem to see strong gold withdrawal levels from the SGE in the buildup to the Chinese New Year – a traditional time of gift giving in the Middle Kingdom of which gold ornaments and jewellery tend to figure strongly.  This year the Chinese New Year falls on February 8th.

Here’s Nick Laird of Sharelynx’s chart setting out the SGE withdrawal figures for the past eight years, which demonstrates nicely the huge (and very consistent apart from a blip in 2014) upwards trend in withdrawals as China’s economy has continued to grow and individual purchasing power has grown with it. The growth in the economy may be slowing down, but it is still growing at a rate which any Western Government will envy enormously.

SGE 2015

While the Chinese central bank – the People’s Bank of china (PBoC) – seems to equate SGE withdrawals to total Chinese demand, Western analysts tend to suggest that the actual figures are considerably lower and come up with various, and differing, reasons for the possible discrepancy.  Indeed their consumption estimates may well prove to be around 1,500 tonnes lower than those the SGE withdrawals figure might suggest.

As we have noted before, a significant proportion of the difference is down to how the analysts estimate ‘consumption’.  Demand categories such as gold used in financial transactions tends to be ignored by the analysts, yet this is still gold flowing into China and in terms of gold movement from West to East remains hugely relevant.

But these same western analysts also seem to ignore the evidence of known Chinese gold import figures and China’s own gold production. Together these look as though they will have totalled just short of 2,000 tonnes in 2014.  It seems strange that in the age old argument as to which country is the world’s largest gold consumer – China or India – that the analysts pretty well equate India’s reported gold imports as that nation’s consumption, while not applying the same principle to China’s known gold imports plus its own domestic gold output (reckoned to be around 470 tonnes in 2015).

Whatever the analysts may suggest, SGE withdrawal levels in comparison with previous years, have to be a good indicator of total Chinese demand (excluding Central Bank purchases which apparently don’t go through the SGE).  Thus it appears Chinese gold demand remains very strong indeed despite the sharp fall in the country’s GDP growth over the past year.

Another 54 t gold withdrawn from SGE. Chinese demand stays very high.

Chinese Shanghai Gold Exchange (SGE) physical metal withdrawals are at an all-time high having already this year exceeded the full year total for 2013 – the previous record year.

Furthermore, the amount of gold being taken out of SGE vaults is rising again as we draw nearer to the year-end with the latest figure for the week ending Nov 20th at 54 tonnes bringing the year to that date total to a massive 2,313 tonnes (as compared with the previous record 2013 full year total of 2,181 tonnes).  The year to date figure is equivalent to around 80% of current global new mined production on its own.

If gold withdrawals from the SGE continue at the current rate until the year end then the annual figure would come out at just under 2,600 tonnes – nearly 20% higher than in the previous 2013 record year

Readers may recall that SGE gold withdrawals were huge in the run up to the Golden Week holiday in September, hitting well over 60 tonnes a week (over 70 tonnes on three occasions) in several weeks in July, August and September, but following the holiday they dropped back to the 40s although still remaining at a substantial level for the time of year.  But recent weeks have seen deliveries beginning to rise again. The year-end period tends to see strength in SGE withdrawals as jewellers and fabricators start to stock up for the demand that comes ahead of  the Chinese New Year which next year falls on February 8th (a Monkey year in the Chinese zodiac).  The New Year is a time of gift giving and invariably sees a further surge in gold demand so it would not be unreasonable for weekly withdrawals to continue to increase and perhaps peak again in January.

Here’s Nick Lynn of www.sharelynx.com’s latest year to date SGE gold withdrawals chart demonstrating the big increase on prior year figures at the same stage.

SGE45

 

Huge YTD 2015 Chinese SGE gold demand will pass full year record in 2 weeks

Full month figures for October aren’t yet available, but announced gold withdrawals out of the Shanghai Gold Exchange (SGE) up to October 23rd have already exceeded last year’s full year total – and last year was the second highest full year ever for SGE gold deliveries.  The record year of 2013 is now in the sights and will almost certainly be surpassed within the next two weeks.  As I have predicted before a full year total of around an absolutely massive 2,600 tonnes of gold  – over 400 tonnes higher than the previous annual record figure (and amounting to some 80% of total global new mined gold output) will pass through the SGE this year.  And this is all physical gold – not paper!

SGE GOLD WITHDRAWALS – YTD AND PREVIOUS 5 FULL YEAR TOTALS

Year

SGE gold withdrawals (tonnes)

2015 (to Oct 23rd)

2,119

2014

2,102

2013

2,181

2012

1,134

2011

1,043

2010

814

Source: Shanghai Gold Exchange, Sharelynx.com

We have already concluded from published export statistics from countries supplying gold to the Chinese mainland that Chinese gold imports this year are almost certainly heading for perhaps 1300 tonnes plus – a very similar figure to that suggested by China gold specialist Koos Jansen writing on www.bullionstar.com – and domestic production will probably be in the order of 480 tonnes for the full year.  Yet the principal mainstream analysts still see China’s consumption as perhaps only around 1,000 tonnes – and latest GFMS figures for Q2 even put China behind India as the world’s biggest gold consumer – although admittedly not by much.

However, the analysts seem to treat India and China totally differently in their assessments.  Indian gold consumption as they see it pretty much equates to the country’s gold import levels (perhaps they include domestic supply too but as this is only 1-2 tonnes a year this is just about irrelevant).  But Chinese consumption is put far behind its new gold supply, which we calculate as imports plus domestic gold production, equating to some 1700-1800 tonnes.  Add recycled gold into the mix and we are probably talking 2,000 tonnes or more – still well short of SGE deliveries…..

To read full article on Sharpspixley.com, click on this link

Another 53.4 t gold withdrawn from SGE. YTD 2061.9 t

Read my new post on sharpspixley.com looking at the latest Shanghai Gold Exchange withdrawal figures which continue to show that SGE deliveries are continuing to head for a big new record – and that Chinese demand is alive and well.

The article also discusses the continuing anomaly between mainstream analysts’ calculations of Chinese demand and the vastly bigger SGE figures.  All explainable!

To read the full article click on this link.

Best Answer Yet to Great SGE Gold Withdrawals Anomaly?

There has been very considerable disagreement between the levels of Shanghai Gold Exchange gold delivery figures and assessed Chinese gold demand as estimated by the mainstream precious metals analytical consultancies.  The figures have been diverging and the latest differences are enormous with SGE gold withdrawals this year running at more than double the analysts’ assessments of Chinese demand.  As we have pointed out beforehand, the basic difference is in the classifications of what the analysts take into their demand calculations – it would otherwise be remarkable that the differences would be so consistent within diverse analytical consultancies – so who is right?……….

This is the opening paragraph to my latest article on the Sharps Pixley website.  To read the full article click on: LAWRIE WILLIAMS: Best Answer Yet to Great SGE Gold Withdrawals Anomaly?

Yet another massive gold delivery week on the SGE

The latest week’s figures on Shanghai Gold Exchange withdrawals see that the Chinese demand for gold remains enormous.  It may have been exaggerated a little due to the prior week being a short trading one due to the Chinese holiday which kept the Exchange closed on the Friday and Saturday, but even so the latest week’s SGE withdrawals totalling 73.7 tonnes for the week ended September 11th is one of the highest single week figures on record – and brings this year’s total to date to just short of 1829 tonnes.  This is fully 241 tonnes higher than at the same time in 2013 when the annual SGE deliveries figure was a huge new record, and 498 tonnes higher than last year – the second highest ever year for SGE withdrawals.

Surely there is some connection here between the reported rundown in COMEX Registered gold stocks and the recent backwardation in gold in London – a truly unsusual occurrence – which has been noted recently?  Physical gold is very definitely flowing east – and by the SGE figures at an increasing rate.  Once again we re-iterate that whether SGE withdrawals are an accurate representation of Chinese gold consumption as some Chinese officials tell us they are certainly a terrific indicator of the continuing Chinese thirst for the yellow metal.

Once again we publish the latest chart from Nick Laird’s sharelynx.com website comparing the latest SGE physical gold withdrawal figures with those at the same time in previous years showing how Chinese gold interest, if anything, is accelerating as its middle class continues to grow.

sge36

As we have noted before it looks like the SGE may be headed for a huge new record in physical gold withdrawals this year – particularly given that the final two months of the year are usually among the strongest for SGE deliveries and the current part of the year usually among the weakest.  The latest projection for the full year total is 2,600 tonnes plus which represents around 80% of global new mined gold supply.  If the current weekly rate holds up for the remainder of the year this percentage could be even higher.  With Russian central bank purchases also high, and Indian demand to take into account to, its not surprising that Western gold stocks appear to be running down.

SGE gold withdrawals an enormous 1464 tonnes so far this year

While physical gold withdrawals from the Shanghai Gold Exchange (SGE) in the latest reported week were lower than the massive 72 tonnes a week earlier at 53 tonnes it remains high for the time of year.  But the key to what has been happening with Chinese demand as represented by SGE withdrawals is where the total for the year to end-July stands compared with previous years.

Looking at this metric we can see from the chart below that SGE withdrawals this year so far have totalled a massive 1,464 tonnes – which is running around 116 tonnes ahead of the huge record 2013 year at the same time and an enormous 370 tonnes ahead of the 2014 figure at the end of July when the annual total came to 2,136 tonnes.  If the average monthly withdrawal level (49 tonnes a month so far) for the current year keeps up we will be looking at annual withdrawals totalling more than 2,500 tonnes for the full year – and with Chinese demand tending to be strongest in the last four months and the first two months of the year this level could indeed be a possibility.

If we compare this potential level of annual demand with the likely total of new mined gold this year, China would account for around 75% of the yearly total on its own!

sge jul

 

Chart from Nick Laird’s excellent sharelynx.com website

These high SGE withdrawal levels do not necessarily mean that the gold price will pick up accordingly, as witness what happened in 2013 when the SGE figure hit a then record 2,186 tonnes, yet the gold price collapsed from $1681.50 at the beginning of the year to $1201.50 by the year end.  However what we are seeing are continuing huge gold flows from West to East (Indian gold imports too are predicted to hit over 1,000 tonnes again this year) which will continue to run down gold inventories in the West, where the price tends to be set.  At some stage any loosely held Western physical gold holdings will be depleted to the extent that the low levels will almost certainly have a positive impact on the gold price – although by that time it may well be China which is setting the price anyway.

Low gold prices seeing Chinese pile in again. SGE withdrawals exceeding new mined supply.

One of the big questions which the gold sector may be asking is what is the low gold price doing to Chinese demand.  Have the Chinese become disillusioned with gold given they piled in so strongly in 2013 when Shanghai Gold Exchange withdrawals for the year hit a massive record 2,181 tonnes, but the gold price has largely been on a downwards path ever since.

We had already seen the beginnings of a pick up in Chinese demand, as expressed by SGE withdrawals, when they hit well over 60 tonnes for the week ended July 10th (see Huge latest week SGE gold withdrawal figure – 62 tonnes) all at a time when seasonality suggests Chinese demand should actually be at its lowest.  But the gold price continued to fall so it would be particularly interesting to see how demand would continue, or whether it would actually increase with more bargain hunters climbing in.  In the event, SGE withdrawals for the week ended July 17th have come out at the fifth highest weekly total ever – again, it should be emphasised that this high demand level has been at what is normally a very weak time of the year for Chinese demand – and brings SGE withdrawals for the year to date according to the chart below from Nick Laird’s excellent www.sharelynx.com and www.goldchartsrus.com charts sites to a huge 1,366 tonnes – probably nearly 80% of global new mined production over the same period.  (Global weekly new mined gold supply is around 62 tonnes – so for the past two weeks Chinese SGE withdrawals will have actually exceeded the world’s mined supply!)

week29sge

As can be seen from the above chart, SGE Withdrawals are currently running some 59 tonnes higher than at the same stage in China’s record 2013 year.

Now we will have to wait for another week to see what the past week’s gold price takedown did to Chinese SGE demand – it could well prove to have been even higher and may have helped lead to the end-week price pick up.

But a word of caution here.  In China’s record 2013 year for gold demand, as expressed by SGE withdrawals, the gold price fell from a beginning of the year level of $1681.50 at the LBMA morning fix on January 2nd to 1201.50 at the close on December 31st, a decline of 28.5%. The fall was perhaps precipitated by heavy gold sales out of the major gold ETFs in the West and although these were more than counterbalanced by the Chinese figures the latter seem largely to have been ignored by the COMEX dominated market.  And this year we are again beginning to see big ETF gold liquidations, albeit not at the same levels as in 2013.   This year, gold opened in London on January 2nd at $1184.25.  A similar 28.5% decline would take the year-end gold price down to just below the $850 level!  We very much doubt this will actually happen – indeed gold could be well set for a major recovery after the absolutely blatant bear raid which has highlighted how easily the gold price can be manipulated to a previously unenlightened general public and the continuing physical gold flows from West to East have to make such manipulations more difficult as Western physical stocks are depleted.

It is also as well to note that the fall in the price of gold in dollar terms so far this year has actually been exceeded by falls in the price of copper, nickel, aluminium and iron ore in particular – See my article on Mineweb on this: Commodities collapse: It’s not just about gold.  Indeed the overall commodities price crash suggests similarities to 2008 and the so called Global Financial Crisis which brought down, not only commodities, but global stocks of any kind.  Are we set for a repeat?  Food for thought.

China middle class growth to add to record gold buying levels there

New York closed yesterday at $1,155.20 down $2.70 with Asia and London holding it there. The dollar was weaker at $1.1011 down from $1.0992 against the euro with the dollar Index at 96.66 down from 96.94 before London opened.  The LBMA gold price was set this morning at $1,154.75 up $1.55. The euro equivalent was €1,047.53 up €2.02. Ahead of New York’s opening, gold was trading in London at $1,155.00 and in the euro at €1,047.90.

The silver price fell to $15.38 down 12 cents in New York. Ahead of New York’s opening it was trading at $15.33.

The gold market is seeing thin trade with few buyers or sellers, allowing the gold price to be nudged around by currency moves. Since the 8th July the holdings of the SPDR gold ETF have moved from 709.65 tonnes and at 167.40 tonnes in the Gold Trust to 709.071 and to 167.76 tonnes in the Gold Trust. This continues to show that the U.S. investor is not interested in gold at present. All the action in gold is occurring below the surface of the price and in Asia, primarily China.

The news that China is doing better than expected, achieving over 10% growth on their retail side and 8.4% on the services side, points to a fast growth rate in their middle classes. It is this group that will add to the current record levels of buying of gold into China. These numbers directly impact gold demand.

While the Greece tragedy, we feel, is no longer impacting the euro exchange rate, the report from the IMF that Greek debt is unsustainable with it reaching 200% of GDP within 2 years really does make a real tragedy of the current deal, which sad to say the Greek Parliament looks like accepting. While it may be politically acceptable to give a “grace period” [postponing repayments and interest?] for 30 to 40 years, according to the IMF, all this does is to emasculate Greek sovereignty and allow the creditors that time to write-off the debt. The country is bankrupt and this deal makes sure it stays that way for more than the next generation. Keeping such a weak link in the E.U. does achieve the objective that it will keep the euro weak for the foreseeable future and maybe longer. Overall this will be positive for the gold price in euros. The entire exercise has weakened the credibility of the Eurozone. For weak nations to use the euro, which reflects far greater strength than their economies deserve, is a fundamental mistake for them.

Silver will likely recover faster than gold now.

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.