Chinese demand - low price = skyrocketing demand ! Commitment of Traders - very interesting silver picture in Commercials - net short position quite low......

http://www.tfmetalsreport.com/blog/4779/considering-chinese-demand

Considering Chinese Demand

Thursday, June 13, 2013 at 1:36 pm

It's one of those things. You hear about it every day but never stop to reallythink about it.

This began as an email discussion with my friend, Ned, yesterday. All of us in Turdville are aware that the Shanghai Gold Exchange has physically delivered something like 1200 metric tonnes of gold, year to date. That's a staggering number and it far exceeds the amount delivered through London and dwarfs the level delivered through the Comex. Prior to yesterday, I looked at that number and thought, "Wow. That's a lot.", but I never stopped to ask the follow-up questions:

1. To whom is this being delivered?  AND
2. Once it's delivered, where does it go next?

Let's start by looking at this handy chart. Note that, at this current pace of delivery, Shanghai is currently delivering each month the entire global mine supply. No wonder they were temporarily "out of stock" back in May! How long can this continue?

OK, now for some additional background. Recall that, since about 2006, the Chinese government has been aggressively promoting gold buying by its citizens. This campaign really began to pick up steam in 2009 following The Great Western Financial Crisis. A quick Google search returns all sorts of articles which describe this policy. Here are just a few examples:http://www.mineweb.co.za/mineweb/content/en/mineweb- gold-analysis?oid=88452&sn=Detail &http://www.bullionbullscanada.com/index.php?option=com_content&view=article&id=2545:china-urges-citizens-to-buy-gold-silver&catid=48:gold-commentary&Itemid=131 &http://news.goldseek.com/GoldSeek/1267715760.php &http://www.forbes.com/sites/gordonchang/2012/01/29/why-are-the-chinese-buying-record-quantities-of-gold/

We also know that officially reported Chinese imports are soaring. In just the first four months of this year, China has imported through Hong Kong nearly 500 metric tonnes of gold. This adds to the 834 metric tonnes that they imported in calendar year 2012.http://www.bloomberg.com/news/2013-02-05/china-gold-imports-from-hong-kong-gain-to-all-time-high-in-12.html

(Charts courtesy of ZH)

So where is all this gold going? I first wrote about it nearly a year ago. Much of it is being recast into kilo bars that, I believe, will ultimately be used to provide a hard asset backing to a future Yuan.http://www.tfmetalsreport.com/blog/3924/gonefor-good

But that still doesn't explain the almost-daily, 15-25 metric tonnes of physical delivery in Shanghai. This is why Ned and I were so perplexed.

So, next, I did what any sensible person would do, I rang up Andrew Maguire. His decades of experience in working the international wholesale market makes him the best source I have for answers to these questions. The conversation went something like this:

Me: "Andy, where the heck is all this gold going?"

Andy: "It's not going anywhere."

Me: "What do you mean?"

Andy: "I mean exactly that. Shanghai settles all that bullion each day to domestic wholesalers. That metal is then shipped off to Chinese dealers and refiners for domestic consumption."

Me: "So wait a minute. You're telling me that public demand in China is currently soaking up 250 metric tonnes per month or nearly ALL of the publicly-reported global mine supply?"

Andy: "Exactly."

And then I started thinking...Well how hard would that be to do? 250 metric tonnes is about 8,000,000 troy ounces. The current population of China is 1.344 billion. If only 25% of the population is taking their government up on the idea of gold ownership, that's 336,000,000 people or, roughly, an amount equivalent to the entire population of the United States!

So now let's say that these 336,000,000 people buy, on average, 1/40th of an ounce every month. That works out to be about 3/4 of a gram or about $35 worth at $1400/ounce. Working the math backward we get: 336,000,000 people buying .75 grams = 252,000,000 grams and 252,000,000 grams = 252 metric tonnes.

Hmmm. Well how about that? Makes you look at stories like this in a different light, doesn't it?http://usa.chinadaily.com.cn/china/2013-06/12/content_16611576.htm

A crowd of customers waits in front of a gold store to shop during a promotion, in Jinan city, East China’s Shandong province on June 11, 2013.

People crowding around a gold products counter jockey for position to pick up something in a gold store which sold its products at a price of 299 yuan per gram in a promotion – about 50 to 70 yuan lower than the normal level, in Jinan city, East China's Shandong province on June 11, 2013. The promotion attracted nearly 10,000 people who rushed to the store despite restricting each customer's shopping time to 15 minutes. While gold markets in the US and Europe saw panic selling, China has just seen a surge in gold sales in the past few months. Chinese households came under the spotlight with their generous purchase of the gold products amid a global fall of the gold price.

OK, then. So, do you still think that the Spec Shorts are on the right side of the trade, that price is going lower and that the "bull market" in gold is over???

Hmmmm. Chew in that over the weekend and then come back for more on Monday. It's going to be another interesting week.

TF

http://www.silverdoctors.com/commercials-cover-nearly-half-of-remaining-short-silver-position-in-past-week/#more-27964

COMMERCIALS COVER NEARLY HALF OF REMAINING SHORT SILVER POSITION IN PAST WEEK!

JUNE 14, 2013 BY THE DOC 1 COMMENT

By SD Contributor Marshall Swing:

Gold & Silver COT Report 6/14/13

Commercial longs added a total 1,581 contracts and covered 1,798 net total shorts to end the week with 48.21% of all open interest, a decrease of +0.55% in their share of total open interest since last week, and now stand as a group at 25,100,000 ounces net short, which is a decrease of just under 17 million net short ounces from the previous week-
Meaning the commercials have reduced their net short position in silver by 40% in just the past week, and by over 90% from their highs near 225 million ounces prior to the announcement of QE∞ last year!

Large speculator longs increased by 458 contracts and picked up 2,111 net short contracts decreasing their net long position to 18,515,000 ounces, a decrease in their net long position of just over 8 million ounces from the prior week.

Small speculators sold off 359 long contracts from their total and picked up 1,367 additional short positions for a net long position of 6,585,000 ounces a decrease of over 8.6 million ounces net long from the prior week.

Silver price was non-eventful until Friday of the COT week when it appears a commercial short covering dropped price all the way to Friday closing, more than $1

Somewhere along the way, speculators picked up another 3,500 shorts as open interest trends remained intact as speculator go more short and commercials go more long.

Silver swap dealers are now over 107 million ounces net long so the dealers are not betting silver will go lower but it appears the speculative traders are trying to force price lower by picking up new positions and reinforcing a lower price.

In gold, there was short covering by the producer merchant whereas the short covering in silver was split between the two commercial traders so my guess is that silver led the way to the bottom last Friday.  Gold speculators added over 6,000 new short positions so expect price to trend downward even though we saw some upward momentum today at the end of the week.