Asia dominant in Swiss gold exports. India top recipient

Swiss gold exports still flowing East.  India top recipient

 Gold Today –New York closed at $1,257.20 yesterday after closing at $1,265 Friday. London opened at $1,255.00 today. 

Overall the dollar was stronger against global currencies early today. Before London’s opening:

         The $: € was stronger at $1.0908 after Friday’s $1.0940: €1.

         The Dollar index was stronger at 99.13 after Friday’s 98.76

         The Yen was weaker at 112.14 after Friday’s 111.37:$1. 

         The Yuan was weaker at 6.8969 after Friday’s 6.8944: $1. 

         The Pound Sterling was weaker at $1.2875 after Friday’s $1.2939: £1.

Yuan Gold Fix
Trade Date Contract Benchmark Price AM 1 gm Benchmark Price PM 1 gm
      2017    5    2

     2017    4    28

     2017    4    27

SHAU

SHAU

SHAU

/

282.69

282.77

/

282.67

282.81

$ equivalent 1oz @    $1: 6.8969

       $1: 6.8944

       $1: 6.8940

      

  /

$1,275.33

$1,275.77

/

$1,275.24

$1,275.95

Please note that the Shanghai Fixes are for 1 gm of gold. From the Middle East eastward metric measurements are used against 0.9999 quality gold. [Please note that the 0.5% difference in price can be accounted for by the higher quality of Shanghai’s gold on which their gold price is based over London’s ‘good delivery’ standard of 0.995.]

The Shanghai Gold Exchange was trading at 281.30 towards the close today. This translates into $1,263.60. New York closed at a $6.40 discount to Shanghai’s close yesterday. London opened at a discount of $8.60 to Shanghai’s close today.

Shanghai re-opened today after the May Day holiday so will not be at usual speed until tomorrow.

LBMA price setting:  The LBMA gold price was set today at $1,255.80 from Friday’s $1,265.55.  

The gold price in the euro was set at €1,151.27 after Friday’s €1,159.99.

Ahead of the opening of New York the gold price was trading at $1,255.75 and in the euro at €1,151.11. At the same time, the silver price was trading at $16.93. 

Silver Today –Silver closed at $16.89 yesterday after $17.30 at New York’s close Friday. Should the gold price return to an upward path, we see silver racing higher than gold’s rise.

Price Drivers

London and Shanghai were closed yesterday, so New York dominated the gold price. We saw small sales of gold from the Gold Trust, but not an amount likely to affect the gold price. But with the dollar falling at the same time as the gold price the market is seeing factors that are not strong enough to hit the gold price more than for a short period of time. History has it that the gold price should be rising when the dollar falls, so we question the current gold price’s ability to hold at this level and direction for long.

With London and Shanghai closed yesterday, control over the gold price lay in New York’s hands. We saw dealers marking down the gold price on little negative news. As you can see above, after New York’s lowering of the gold price, demand in China has not yet responded. With London open today as well, we expect tomorrow will see global gold prices point the way forward.

What could be temporarily softening the gold price is the threat of war in Korea now appears to be abating, for now.

From a Technical viewpoint, the gold price has fallen through support to just above the next level of support.

India & China imports of gold from Switzerland

Many may think the gold price reflects demand and supply of physical gold. It doesn’t. It primarily reflects marginal supply and demand, speculative activity and the assumptions of the main dealers as to where the market is going. The physical demand and supply of gold is mainly directly contracted between physical buyers and sellers, with the contract price, primarily the London pm price setting, but for a growing number of market professionals the Shanghai gold Fix is being used by both parties to the contract. In other words the trading in physical gold, in the case of around 95%+ of such buyers and sellers, does not influence the gold price.

Should the buyers of gold demand more than the suppliers can provide in the physical market, then the extra demand will overwhelm the gold price. This is why it is so important to keep ones finger on the pulse of the physical market. That’s why we keep our eyes firmly on the Shanghai Gold Exchange, the largest physical market in the world. So, when we see the Swiss export monthly figures to, in particular India and China, growing so strongly over time we know there is a point when they will overwhelm supply and then affect the gold price significantly. Last month showed clearly the volumes of physical gold demanded by those two countries.

In March exports from Switzerland, in figures reported by the Swiss Customs Administration, show that India, was easily the top recipient, taking 55.6 tonnes.  Hong Kong imported 24.3 tonnes and the Chinese Mainland 24.0 tonnes directly.  These latter figures confirm that of total Chinese imports around 40-50% flow directly into the Chinese Mainland through other ports of entry than Hong Kong. (See: March Swiss gold exports show India no.1 again.  

India, Hong Kong and China alone accounted for around 74% of Switzerland’s total gold exports, while Asia and the Middle East accounted for just under 88%, emphasizing the continuing flows of gold from West to East.

Total February gold imports totaled over 89 tonnes in February into India.  With only 37.2 tonnes being sourced from Switzerland that meant that nearly 60% of Indian gold imports were sourced from countries other than Switzerland during that month which puts an additional new complexion on likely total Indian gold imports for the year. These figures exclude the, not reported, smuggling of gold into the country.

Why through Switzerland? London and New York deal in ounces, whereas Asia deals in the metric measurements of grams and kilos. This is why to ensure one can always deal in gold [without a re-refining process] it is better to buy bars in metric measurements

Gold ETFs  

Yesterday saw no sales or purchases from or into the SPDR gold ETF but a sale of 0.54 of a tonnes from the Gold Trust. Their holdings are now at 853.362 tonnes and at 203.82 tonnes respectively.

Since January 6th 2017 45.772 tonnes have been added to the SPDR gold ETF and the Gold Trust.

Julian D.W. Phillips 

 GoldForecaster.com | SilverForecaster.com | StockBridge Management Alliance 

To ensure you can benefit from the future higher gold prices we will see then, you need to hold it in a manner that makes sure it can’t be taken from you. Contact us at admin@stockbridgemgmt.com to buy physical gold in a way that we feel, removes the threat of it being confiscated. We’re the only storage company that offers that!
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  Global Gold Price (1 ounce)
  Today Yesterday
Franc Sf1,249.35 Sf1,255.75
US $1,255.75 $1,265.30
EU €1,151.11 €1,159.76
India Rs.80,668.12 Rs. 82,763.27
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Chinese gold consumption: Far higher than most analysts and media tell us

Edited version of article which first appeared on news.sharpspixley.com on Feb 15th

Once again we are indebted to Koos Jansen for crunching the numbers on China’s gold imports in 2016.  He has added together direct imports to mainland China from the following nations/areas which publish detailed export statistics – namely Hong Kong (771 tonnes), Switzerland (442 tonnes), Australia (53 tonnes up until September – October to December figures not yet available) and the UK (only 15 tonnes, although most UK gold exports to China now seem to be being routed via Switzerland where the refiners take good delivery gold bars from the UK and re-refine them to the sizes and purities demanded in the East).  Jansen sees little more going directly into mainland China from other sources and allowing for around 20 tonnes going in from Australia for the final quarter of the year comes up with a grand total of Chinese gold imports at approximately 1,300 tonnes. (See: CHINA Net Imported 1,300t Of Gold In 2016)

In addition – the USA will have exported around 4.5 tonnes direct to the Chinese mainland, and Jansen also comments that South Africa doesn’t break down its gold export figures so he may well suspect that some is going in from there too – but the amounts will be relatively small so we can stick to 1,300 tonnes as a nice round figure.

Add to that China’s own gold output, estimated by Jansen at 453 tonnes and there will also have been a scrap gold element to be taken into account.  This suggests that China ‘consumed’ around 2,000 tonnes of gold in 2016, which equates quite closely to the Shanghai Gold Exchange (SGE) gold withdrawals figure for the year of 1,970 tonnes – (See: 2016 SGE gold withdrawals lowest for four years).  This would seem to confirm Jansen’s oft-made assertion that SGE gold withdrawals are equivalent to total Chinese gold demand – a premise largely dismissed (perhaps without any adequate reason) by the major gold consultancies which virtually all put Chinese demand at less than 1,000 tonnes.

In part, this discrepancy relates to what the major consultancies label as ‘demand’.  They tend to ignore what Jansen labels as institutional demand which he puts at at least 778 tonnes plus, depending on the amount of supply from scrap sources.

In terms of Chinese gold flows though, all the above figures ignore Chinese central bank demand.  While this, at least in terms of reported additions to its gold reserves, appears to have slipped in 2016, it still came to a little over 80 tonnes – so overall gold flows for China last year look to have been in excess of the 2,000 tonnes noted above, although not by much.  This equates to 60% plus of the total of global new mined gold in 2016.

One other point from the latest statistics is the continuing reduction of the proportion of gold flows into the Chinese mainland via Hong Kong.  Too often we still see media headlines suggesting Chinese gold demand has risen, or fallen, purely based on the stats coming out of Hong Kong.  Based on the gold import figures alone, Hong Kong now accounts for less than 60% of the gold going into mainland China.  Thus the Hong Kong figures can no longer be considered a proxy for total Chinese gold imports.  As Jansen points out in his article:

Most likely Hong Kong’s position as the largest gold exporter to China will slowly fade in the coming years, as the State Council is stimulating gold freight to go directly to Chinese cities (hoping the Shanghai International Gold Exchange will eventually overtake Hong Kong’s role as the primary gold hub in the region). Consequently, gold exports to China are increasingly bypassing Hong Kong.  In December 2016 we got a preview of what is about to come: Switzerland net exported an astonishing 158 tonnes directly to China, up 418 % from November 2016, up 168 % from December 2015, and 106 tonnes more than Hong Kong did.”

See our own take on the Swiss December figures: China 154, Hong Kong 39.  Swiss Dec gold exports show remarkable gold flows.  We have long been pointing out the decline in importance of exports from Hong Kong to the mainland in the overall Chinese gold import figures.  Perhaps our message will eventually get through to much of the mainstream media – and some ‘expert’ commentators and analysts – who continue to ignore this point and continue with headlines which appear to collate Chinese total gold imports with those coming in from its Special Administrative Region!

Gold flows to China via Switzerland soar in December

The latest gold import and export figures into and out of Switzerland both showed huge increases in December with exports to China a particularly notable 158 tonnes compared with a rather small 30.6 tonnes in the previous month.  With gold flows into the Chinese mainland from Hong Kong also picking up in December this represents pre-Chinese New Year holiday demand and may also have been boosted by the lower gold prices prevailing in the final quarter of 2016.

Switzerland has always been a major conduit for gold flowing into stronger Eastern hands.  That into China for example stays there and doesn’t come out again.  The private Swiss gold refineries, Valcambi, Metalor, Pamp and Hereaus all specialise in re-refining gold scrap and 400 ounce good delivery gold bars into the smaller, mostly kilobar, sizes in demand in the Middle and Far East.

But most significant in the latest figures were the exports recorded to China of 158 tonnes – and given that China imports gold directly from a number of other sources too – this suggest a huge pick-up in Chinese demand at the end of a particularly weak year.  We have already pointed to a sharp fall in Shanghai Gold Exchange (SGE) gold withdrawals over the year (See:  2016 SGE gold withdrawals lowest for four years) which is symptomatic of the same overall reduction in gold demand in China over the full year, but whether the big rise in December imports from Switzerland is purely due to demand ahead of the Chinese New Year, or is gold price-related following the dip in US dollar bullion prices immediately following the US Independence Day holiday in July, is uncertain – but probably a combination of both.

bloomb-china-gold-imports-dec

The above graphic from bloomberg.com demonstrates the huge increase in Chinese gold imports from Switzerland in December.

Swiss gold export and import anomalies continue

We have highlighted the strange Swiss gold import and export statistsics which have been prevailing so far this year on this site and others for which I write.  The June stats from the Swiss Customs Administration have now been announced and these anomalous gold flows are apparently continuing apace.  Switzerland has been seeing some huge reversals in imports and export data for some countries with a prior strong source of Swiss gold exports now the leading supplier of gold imported into the Alpine nation in the UAE, while the UK, in the past a major source of gold imported into Switzerland, has been the principal export destination so far this year.

I have noted some correlation between these reversed gold flows and the rise in the gold price this year, the drop in Asian demand and the big flows into the big gold ETFs, and comment on this in two articles – one on seekingalpha.com and the other on sharpspixley.com.

For those interested, links to these two articles follow:

Swiss Gold Stats Point To Big Continuing Supply/Demand anomalies.

and

June Swiss gold statistics highlight continuing reverse gold flows

Swiss gold import/export data: Update with charts

This is an edited version of a previously published article, but with the addition of illustrative bar charts of full country by country data which emphasise the anomalies pointed out in the original article.  The charts ore from Nick Laird’s excellent sharelynx.com webite, received, in this instance via Ed Steer’s edsteergoldandsilver.com service.

swgoldimportsmay16

swgoldexportesmay16

The latest gold import and export data from Switzerland, one of the few countries to report these flows in detail, as usual open up some interesting insights into global supply and demand.  Overall Swiss gold exports rose by around 20% month on month to 177.3 tonnes making the country a net exporter in May.  Generally Swiss gold imports and exports are pretty much in balance given that they mostly comprise imports of gold for re-refining and re-export.

While gold exports from Switzerland to China and Hong Kong both picked up in May, its principal country of imports was again the United Arab Emirates normally a recipient of Swiss gold, not a provider.  The import volume from this source, which has little or no domestic gold production,  at 30% of the total could be seen as truly remarkable.

Indeed in another reversal of normal gold flows, the U.K. was again the biggest importer of Swiss gold in May, necessary, we feel, to meet the big demand in London from the principal gold ETFs which vault their gold there.  Again, the UK accounted for 39% of Switzerland’s total exports – a bigger total than exports to Hong Kong, China and India combined!  This is the third month in a row of significant Swiss gold exports to the UK, whereas in past years the UK has usually been the biggest exporter of gold to Switzerland.

Exports to the U.S. were also unusually high.  Again any gold flows to and from the U.S are normally in the eastward direction.  We have surmised before that available supplies of physical gold in London are currently tight and this only serves to add weight to that premise and could also suggest that a similar position is arriving in the U.S. too given recent strong investor demand for bullion.  UK bullion investment has also been exceedingly high in the runup to the Brexit vote – a wise investment for those in the UK who took our advice to buy gold as wealth insurance in case  the UK voted to leave the EU as has happened.  We described this as a no brainer back a couple of weeks ago –  Britain Facing Brexit Bombshell.  What Would Happen to Gold?.  We hope readers took our advice.

Re China and Hong Kong, exports to the Chinese mainland were 19 tonnes, up from 13.8 tonnes in April, while exports to Hong Kong were up by a very large 14.5 tonnes to 24 tonnes making the percentage of gold shipped to the Chinese mainland against that shipped directly to Hong Kong (which will also subsequently nearly all find its way to mainland China) at around 44%.  This again confirms our oft-repeated mantra that Hong Kong gold imports and exports can no longer be taken as a proxy for the Chinese figures with so much gold now going to the Chinese mainland directly.  This is a major change from three years ago when the Hong Kong:China ratio was far higher, but still some media outlets ignore this fact.

Prior to the current year, The U.K. was always a significant supplier of gold to the Swiss refineries which have specialised in melting down and re-refining 400 kg good delivery gold bars into the smaller sizes most in demand in the Asian markets.  Thus, as we pointed out a month ago when the previous set of Swiss stats were released – See: Swiss gold data raises new doubts on London’s gold stocks these reversals of gold flows, if they continue, could be an indicator of some serious tightness in supply of physical gold to the markets from traditional sources as noted above.

While exports to China and Hong Kong were substantially higher in May, they remained very weak a was the flow to that other traditional gold market, India, where gold seems to have fallen out of favour in recent months.  In May the figure was only 18.5 tonnes, down 16% from an already low April figure.  Taken together with reports of substantial discounts in the local gold price, it appears that Indian buyers are nervous of the substantial gold price rise so far this year and may be holding off purchases in expectation of a price fall.  Not a good policy in the event.

The other big anomaly in the figures was that the two biggest exporters of gold to Switzerland in May were the United Arab Emirates again with 42.1 tonnes and Hong Kong with 11.6 tonnes although the latter was a net importer in May – not the case in April.  Neither of these countries/regions are normally exporters of gold to Switzerland in any significant quantities, but are major trading centres, suggesting that the lower demand from what are probably their biggest normal export markets, India and China respectively has led to inventories running higher than traders are happy with, and with the higher prices prevailing there has been perhaps an incentive to return gold to the Swiss refiners and take profits.

We will thus be following this Swiss import/export data to see if these supply/demand anomalies continue in future months.

60% of Swiss gold exports to China this year going direct rather than via Hong Kong

A follow-up article to the one I published here recently on Switzerland nowadays shipping more gold to mainland China than to Hong Kong has been published on sharpspixley.com.  The original article related to Swiss gold export figures for January showing the highly significant fact that the country shipped 42.1 tonnes of gold to mainland China and only 24.5 tonnes to Hong Kong.  Now Switzerland has released its February gold export statistics showing that again more gold went directly to mainland China than to Hong Kong (26.0 tonnes to 19.4 tonnes)  This works out That 60% of Swiss gold exports in the first two months of the year went directly into mainland China, bypassing Hong Kong altogether.

Go back around three years and nearly all China’s imported gold went to Hong Kong first and then to the Chinese mainland, so Hong Kong gold exports to China were taken by the media and major gold analysts as representative of total Chines gold imports.  This is obviously no longer the case with perhaps more than half Chinese gold imports not touching Hong Kong at all – yet some media still publish the figures as though a sharp year on year fall in Hong Kong gold exports to the mainland indicates a similarly sharp fall in total Chinese gold imports.  As the Swiss figures show this is no longer the case.

To read the Sharps Pixley article click on China taking in more Swiss gold than Hong Kong for second successive month

Latest SGE gold deliveries suggest enormous 2015 total of over 2650 tonnes!

The huge level of weekly Shanghai Gold Exchange delivery numbers is becoming something of a repetitive news item and is perhaps losing its impact, but it shouldn’t.  Week 37 (ending September 18th) saw another 63 tonnes delivered out of the Exchange, which makes the year to date total 1,892 tonnes – 281 tonnes more than at end week 37 in the massive 2013 record year for Chinese gold consumption.  If we extrapolate from the year to date figure this would suggest total SGE gold withdrawals for the year would come to an enormous 2,650 tonnes or higher – equivalent to over 80% of total global supply of new mined gold.  With SGE deliveries usually rising late in the year in the long build-up to the Chinese New Year, which falls on February 8thnext year, we certainly shouldn’t discount the likelihood of this level being achieved, or even bettered.  There seems to be no slowdown happening as yet.

Overall, SGE deliveries started to pick up in early July (normally one of the weakest months of the year) and have averaged 62 tonnes a week since then.  The figure for the week ended September 11th was the third highest weekly total ever

12 week withdrawal figures on SGE to September 18th

SGE Withdrawal week ended

Physical gold withdrawn

July 3rd

44.3 tonnes

July 10th

61.8 tonnes

July 17th

69.2 tonnes

July 24th

73.3 tonnes

July 31st

53.3 tonnes

August 7th

56.1 tonnes

August 14th

65.3 tonnes

August 21st

73.0 tonnes

August 28th

59.9 tonnes

September 4th*

36.8 tonnes*

September 11th

73.7 tonnes

September 18th

63.2 tonnes

Total

729.9 tonnes

*September 4th figures are for a three day trading week with the Exchange closed for the Chinese Victory Day celebrations on the Thursday and Friday.

These figures fly in the face of the same mainstream analysts’ estimates of Chinese demand this year, which they say is slipping, along with the nation’s declining GDP growth rate – although this is still currently estimated at over 6% .  The disparity between the SGE figures and the analysts’ assessments of Chinese consumption is ever growing – and this year looks as though the difference by the year end may be as much as 1,500 tonnes or more.

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.

Jeff Christian of CPM Group, in his recent presentation at the Denver Gold Forum attributed the enormous disparity to a very large proportion of SGE gold being in a loop between jewellery manufacturers and the Exchange which meant that he considers there’s a huge amount of double counting involved.  Yet if this is the case then presumably it would also have applied to 2013 to the same extent and back then there was recognition from all that Chinese demand hit a new record level, although still not as high as SGE gold withdrawals for that year.  With SGE withdrawals so far this year now being 17% higher than at the same time in 2013, then we should expect to see demand as calculated by the analysts at considerably higher levels than even in 2013 – not lower as they are claiming this year.

Jeff Christian and CPM’s view that SGE gold withdrawal figures overstate the demand position by as much as 233% does seem excessive under these circumstances.  It suggests recognition that there is this huge assessed  discrepancy between the SGE figures and actual Chinese demand as calculated by the analysts and then coming up with a theory to fit their own calculations.  This theory is then presented as fact.  I may be doing Christian a disservice here, but given the other mainstream analysts have sometimes come up with differing answers to the massive gap, one has to wonder how accurate any of their Chinese demand assessments actually are.  There is a severe lack of transparency here which presumably the Chinese have no wish to clarify.

If we add up known gold exports to China from Hong Kong, and direct to the mainland, from Switzerland and the UK, all of which publish these data, add in China’s own domestic production plus an assumed level of domestic scrap supply and imports from other nations, all this looks to be heading to a total of 2,000 tonnes or more this year.  This, like the SGE withdrawal figures, is also hugely more than the analysts’ demand estimates.  But this gold is all being ‘consumed’ inside China in some form or other – perhaps including some by the central bank – and continues to demonstrate China’s dominant position in the absorption of global physical gold flows.

According to gold and China watcher Koos Jansen, SGE withdrawals are indeed recognised by the Peoples Bank of China as equating to the country’s real gold demand – but then of course the PBoC has also been complicit in under-reporting the Chinese central bank gold holdings for many years. And there are few outside China who believe that the supposed increase in transparency engendered by now reporting monthly central bank purchases is necessarily any more realistic than the times when information on these purchases was withheld.

The PBoC, of which the SGE is a subsidiary, also tells us that the Gold Exchange rules prevent roundtripping of gold which, if correct, would totally negate Christian’s theory – but then it’s a case of who do you believe to provide the more realistic data – the PBoC, or the World Gold Council, GFMS, Metals Focus or CPM.  Perhaps none of the above.  The analysts are all good at picking up and collating data from reliable sources, but perhaps not from countries like China which can make disinformation into an art form if it suits.

This blog post was originally published on www.sharpspixley.com.  View more of my articles by clicking on the site.

Update: 44% of June Swiss gold exports to China bypassed Hong Kong

The importance of Hong Kong as a channel for Chinese gold imports continues to diminish with nearly half of Swiss June gold exports going direct to the mainland.

As we have noted here before, there has been an increasing trend for China to import gold directly via its mainland ports of entry rather than via Hong Kong, which makes Hong Kong to China gold export data less and less relevant.  So headlines like the recent one from Bloomberg: China’s gold buying from HK drops to lowest in a year  and the accompanying ‘analysis’, which puts it all down to lack of mainland China demand, have to be seen in context and as potentially misleading.  Firstly June is normally a low month for gold trade in the area, but even so the sentiments expressed in the accompanying article seem to be countered by Shanghai Gold Exchange withdrawal figures.  These arerunning exceptionally high for the time of year with 69 tonnes withdrawn from the SGE in the latest week for which stats are available at a time of year when we might normally expect to see withdrawals of 20-30 tonnes – See: What to make of gold

One of the biggest exporters of gold to Hong Kong and China is Switzerland, and luckily we have official Swiss statistics to throw a little more light on this subject.  In June total Swiss gold exports totalled just under 100 tonnes with 32.3 tonnes going to China and Hong Kong combined. But of this total fully 43.6% went direct to the Chinese mainland, bypassing Hong Kong altogether which makes the Hong Kong export figures to China less and less indicative of overall Chinese gold imports.  Indeed for the whole of 2014 around 37% of Swiss gold exports to China and Hong Kong – which together amounted to 600.3 tonnes – went directly to the Chinese mainland without first landing in Hong Kong.  It is perhaps fair to assume that gold exports to mainland China from other nations is also seeing an increase.

Here’s the www.sharelynx.com chart showing the major country-by country breakdown of Swiss gold exports for June: (apologies – the chart somehow didn’t appear when article first posted)

swissgold

As can be seen from the above chart, India, Hong Kong and China between them accounted for 54% of total Swiss gold exports, and if one adds in other south Asian and east Asian nations the area accounted for around 65% of all Swiss gold exports that month.

Hong Kong becoming less and less relevant as gold import route for China

Recent Reuters headline: China’s gold imports from Hong Kong dipped to 7-month low.  The brief article which followed implied that Chinese gold demand was also dropping in commenting that Honk Kong imports remain a proxy for Chinese gold demand.  They used to be, but not any more!

A more significant article from Bloomberg on Swiss gold exports- probably by far the biggest source of Chinese gold imports – in March noted that 46.4 tonnes was exported directly to mainland China, and only 30 tonnes to Hong Kong.  Thus 60% to China and 40% to Hong Kong.  This massive change in gold export routes from a year earlier when most Swiss gold going to China was still being routed through Hong Kong, failed to elicit any comment at the time.  We had noted earlier here also that U.S. gold exports to China were increasingly being sent direct after virtually all going through Hong Kong in early 2014: 36% of October U.S. gold exports to China went direct rather than via Hong Kong

Now we don’t know exactly what proportion of Chinese gold imports are now going in directly and bypassing Hong Kong, but judging by the Swiss export data it could be as much as 50% or more and while Hong Kong obviously remains a significant route for the gold imports it looks to be becoming less and less relevant – particularly given further restrictions being lifted on the number of banks and companies allowed to import gold directly.

Thus the days of Hong Kong figures being relatively close to providing a very good idea of total Chinese gold imports would now definitely seem to be ending which will make estimating overall Chinese gold imports ever more difficult given that mainland China does not report this data. But on the basis of the latest Shanghai Gold Exchange withdrawal figures which are, if at least nothing else, an excellent trend indicator of overall Chinese gold demand, the Asian Dragon could be heading for a record year for gold demand with around 780 tonnes withdrawn so far this year from the Exchange up until one week ago.  While it is far too early to make an annual estimate given these flows out of the Exchange tend to fall off mid-year, before picking up again from September onwards, should withdrawals continue as expected we could well be in for a comfortable new record come the year end.

Continuing strong Asian demand has gold bucking the technical trend

Julian Phillips’ commentary on what is currently driving the gold and silver markets – and market action overnight and this morning.

Isn’t it infuriating? The Technical picture has no discernible pattern at the moment, but pointed down to most people, yesterday. But prices went up instead, as Asian demand filtered through constantly, pushing short positions to close once again. To illustrate just how strong Asian gold demand is the Swiss reported exports of re-refined gold [in the 1 kg range] of 46.4 tonnes of gold to China and a larger number of 72.5 tonnes of gold to India up from 23.6 tonnes and 27.1 tonnes of gold respectively for February. Please note that this was not for a specific festival [the main one was in April] but a general stocking up. This increase in tonnage has much more to do with low prices that went to gold’s low of $1,143. The demand from China was not festival driven either.

Traders with an eye on currencies saw the need to lift the gold price, when others felt the opposite. So we are seeing the waters of the gold market roil and make them turbid [boiling and unclear].  So where do we go from here? We can only say, as we said above, in the forecast.

Today E.U. Finance Ministers meet in Riga to discuss Greece. It is these Ministers who will decide on the matters so Merkel’s meeting with Tsipras did not change the likelihood that no deal will be reached there. It’s the accountants that hold the power not the politicians at this moment, but at the end of the day we feel the politicians will win out. This story will drag out all the way, it now seems, right through June. The exchange rate of the $:€ will not be affected by Greece until a conclusion is reached one way or the other. Until then it is all about the dollar and its strength.

The dollar index fell to 97.18 after yesterday’s 98.16 with a stronger euro at $1.0833 now.  Gold is back in consolidation mode for the weekend, it seems.

There were no purchases or sales of gold into the SPDR gold E.T.F. or the Gold Trust on Wednesday. The holdings of the SPDR gold ETF are at 742.347 tonnes and at 165.58 tonnes in the Gold Trust.

Markets yesterday and this morning

New York closed at $1,194.70 up $7.90 on Thursday in NY. Asia held it there before the LBMA Gold price was set at $1,192.15 up $4.90. The euro equivalent stood at €1,099.87 down €5.84 while the dollar was stronger at $1.0834 against yesterday’s $1.0742. Ahead of New York’s opening, gold was trading lower in London at $1,192.30 and in the euro at €1,101.74.

The silver price closed at $15.89 up 10 cents on Thursday. Ahead of New York’s opening it was trading at $15.87.

 

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

 

How much gold is now going directly to mainland China? 36%?

By far the largest exporter of gold to China and to Hong Kong is Switzerland and its latest figures for 2014 suggest that 36% of Swiss gold exports are now going to mainland China directly

Lawrie Williams

Latest precious metals export data out of Switzerland for the full 2014 year suggest that in that year, taking gold specific exports only, around 36% of the gold exported to Hong Kong and China  combined actually went directly into China rather than via the former British Crown Colony.  As various reports in the media have suggested, India was the biggest recipient of Swiss gold at 471.2 tonnes, but China and Hong Kong, which after all is a special administrative region of China, together took in 590.4 tonnes, further suggesting China, contrary to some reports, remained the world’s biggest gold consumer last year..

Totals Swiss gold exports for the year were some 1,746 tonnes and the top 10 importers of Swiss gold in 2014 are set out in the table below.  Between them they account for over almost 90% of all Swiss gold exports.  The next three most significant importers of Swiss re-refined gold were France with 37 tonnes, the UK with 29.8 tonnes and Malaysia with 22.6 tonnes.

Table: Top 10 recipients of Swiss gold exports

Country Tonnes imported % of Swiss Gold exports
1.       India 471.2 27.0
2.       Hong Kong 377.2 21.6
3.       China (Mainland) 213.1 12.2
4.       Singapore 134.2 7.7
5.       Germany 88.9 5.1
6.       Turkey 69.1 4.0
7.       United Arab Emirates 66.3 3.8
8.       Saudi Arabia 60.5 3.5
9.       Thailand 44.4 2.5
10.   Italy 43.6 2.5

Source: Swiss Federal Administration

So what is the significance of this?  For many years very little gold was imported directly to mainland China.  Nearly all came in via Hong Kong.  So Hong Kong (which published its gold import/export data) was widely seen as a proxy for total Chinese gold imports.  China itself didn’t publish such data so what might have been coming in directly was widely disregarded by Western analysts as of no consequence.

But last year, China moved the goalposts, and eased the path of gold imports directly to the mainland from other countries than Hong Kong.  However because China doesn’t publish direct gold import data no-one really knows exactly how much gold is now flowing into China directly and although Hong Kong is now not the only significant import route Western mainstream media often imply the Hong Kong data still equates to Chinese demand – so the recent news that exports from Hong Kong to China fell 32% last year was widely seen as an indicator that Chinese consumption fell by a similar amount.

Thus the latest official export data from Switzerland (as do the latest figures for U.S. gold exports) show that for a large part at least of China’s gold imports, around a third are now going into China directly which makes the Hong Kong figures ever less indicative of the overall picture.

The other interesting point from the Swiss statistics is that this small nation takes in, re-refines and then exports a volume of gold equivalent to around 56% of the world’s newly mined annual gold supply.  The volumes of gold being exported to other countries than India and China/Hong Kong are also worthy of note – particularly imports into Singapore and Thailand being other key Asian gold consumers – and Saudi Arabia, Turkey and the United Arab Emirates, which between them accounted for  as being strong indicators of Middle Eastern demand.  Between them these three states imported 195 tonnes of Swiss re-refined gold – some of which was doubtless destined for Iran and Islamic State, both of which are cut off from direct gold supplies from normal sources.  Gold exports and imports can be a murky business at the extremes!