Wednesday, February 19, 2014

Gold news items February 19 , 2014 .......Koos Jansen -- The World Gold Council Clueless on Chinese Gold Demand ? With Comex gold warehouses reflecting no movement in or out yesterday - and the debiting of delivery of bullion for February longs still waiting , is an impending gold and silver smash looming ? Might negative data tonight from China and Japan give the needed excuse ?

2/20/144 updates......

TF Metals Report: Gold is NOT flowing back into GLD

1:30p ET Thursday, February 20, 2014
Dear Friend of GATA and Gold:
The TF Metals Report's Turd Ferguson today contradicts assertions that gold is flowing back into the exchange-traded fund GLD. Instead, Ferguson writes, the metal moving back into GLD is being withdrawn almost immediately. "Physical gold is clearly in very short supply worldwide as demand is insatiable," Ferguson writes. His commentary is headlined "The GLD Two-Step" and it's posted at the TF Metals Report here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Customs data shows gold flow from London to Hong Kong through 


Switzerland Sent 80% of Bullion Exports to Asia in January
By Nicholas Larkin
Bloomberg News
Tuesday, February 20, 2014
Switzerland sent more than 80 percent of its gold and silver bullion and coin exports to Asia last month, the Swiss Federal Customs Administration said today in an e-mailed report. It imported most from the United Kingdom.
Hong Kong was the top destination at 44 percent on a value basis, with India at 14 percent, the Bern-based customs agency said in its first breakdown of the gold trade data since 1980. Singapore accounted for 8.6 percent of exports, the United Arab Emirates 7.9 percent, and China 6.3 percent.
Switzerland imported 4.32 billion Swiss francs ($4.87 billion) of the metals from the U.K., or 60 percent of total inbound shipments, according to the report. The U.S. was second at 4.9 percent, Italy at 3.8 percent, Germany at 2.8 percent and Thailand at 2.5 percent, the data show.
Gold slumped 28 percent last year and silver plunged 36 percent, both the biggest annual declines since 1981, as some investors lost faith in the metals as a store of value. As holdings in gold-backed funds that are mostly listed in the U.S. and Europe declined, lower prices boosted demand from Asia in a sign of bullion flowing from the west to east. China overtook India as the largest gold buyer last year, the London-based World Gold Council said in a report this week.
Gold for immediate delivery in London rose 8.9 percent this year to $1,313.32 an ounce and silver advanced 11 percent to $21.56 an ounce.
* * *
The complete report is posted at the Swiss customs agency's Internet site here:

U.S.-China agreement on gold is plausible, Hong Kong fund manager Kaye says

1:45p ET Thursday, February 20, 2014
Dear Friend of GATA and Gold:
Hong Kong fund manager William Kaye today speculates to King World News that renewed looting of the exchange-traded fund GLD may signal another attack on the gold price. Kaye also speculates that China and the United States may have an agreement whereby the U.S. makes discounted gold available to China in exchange for China's declining to make trouble with the inflationary monetary policy of Western central banks. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


Koos Jansen.......

The World Gold Council Clueless on Chinese Gold Demand?

February 18, 2014 the World Gold Council released the Gold Demand Trends for 2013. According to this report total 2013 Chinese consumer demand was 1,065.8 tons. In my opinion this number is highly disputable.

Chinese Gold Market Essentials

The Chinese gold market is completely structured top down. The main physical (spot and deferred) exchange in China is the Shanghai Gold Exchange (SGE), that serves as the entrance point for imported and mined gold to the Chinese marketplace. Additionally the SGE is supplied by recycled gold. The Shanghai Futures Exchange (SHFE) facilitates the trading of gold futures contracts (to compete with the pricing power of Western markets).

The reason the PBOC requires imported and mined gold to be sold first through the SGE is to keep track of how much gold is added to non-government reserves (jewelry, bar hoarding, etc). The setup is quite simple; to channel import and mine supply through one exchange the PBOC can efficiently supervise the quality and quantity of the gold that enters the Chinese market place. The PBOC knows exactly how many grains of fine gold are being held among the people.

Before gold is allowed to enter the vaults of the SGE it’s assayed by the National Quality Supervision and Inspection Center for Bullion & Its Products that grants a minimum fineness of 99.95. Gold withdrawn from the SGE vaults can only re-enter as recycled gold. After being remelted, by one of the associated refineries (see the list on page 40), and an assaying process the gold can move back into the SGE vaults. Just to make sure on SGE level gold of the highest purity is traded.


The consequence/purpose of the structure of the Chinese gold market is that SGE withdrawals equal wholesale demand. Confirmed by the fact that total demand reported by the China Gold Market Reports 2007 – 2011 exactly equal SGE withdrawals for the corresponding years. For an extensive analysis read this.

The Great Disparity

In 2013 SGE withdrawals accounted for 2197 tons. The next screen dump is from the last SGE report of 2013, the second number from the right (red - 本年累计交割量) is the total amount of gold withdrawn from the SGE vaults in Kg.

SGE total withdrawals 2013

The World Gold Council (WGC) claims to report on ALL sorts of demand; consumer, investment, industrial and central bank demand. This is from their February 18, 2014 press release:

Global consumer demand for gold at unprecedented levels in 2013 China the world’s largest gold market in 2013 

Consumers around the world bought gold in record amounts in 2013, led by demand in China and India, with China becoming the world’s biggest gold market, according to the latest World Gold Council Gold Demand Trends report. …

In 2013 the gold market saw 21% growth in demand from consumers which contrasted with outflows of 881t from ETFs. The net result was that global gold demand in 2013 was 15% lower than in 2012, with a full year total of 3,756t. …

Central banks

Although down 32% on 2012 they continued to be strong buyers of gold, a trend which began in 2009. 2013 saw net purchases in all four quarters, totalling 369t, meaning 12 consecutive quarters of net inflows. …


Demand reached 405t in 2013, virtually unchanged from the figure of 407t in 2012.

We can see the WGC tracks consumer (jewelry, bar and coin), ETF (and thus investment funds), central bank and industrial demand. Logic, if one wants to thoroughly analyze the gold market all facets of supply and demand must be taken into account.

So how come there is such a big difference between Chinese demand reported by the WGC, 1066 tons, and wholesale demand, 2197 tons? Why is the WGC missing 1132 tons? One reason is because the Chinese are hiding it. Since 2008 the Chinese have great interest to hoard in the dark in order to diversify their US dollar reserves, strengthen their economy and protect it from external shocks. The China Gold Association (CGA)changed the way they measure demand and all other Chinese gold institutions ceased publishing reports on demand since 2011. The only valuable information they continue to publish are SGE withdrawals. Not often, but sometimes the facts seep through the Chinese press:

China’s explosion in demand for physical gold in 2013 left a deep impression on international investors. The Shanghai Gold Exchange withdrawals for the year up till 27 December 2013 exceeded 2180 tons. Considering the exchange’s position as a hub for domestic gold circulation, in conjunction with a system that forbids withdrawn gold from re-entering inventory, to a large extent the withdrawals number can be treated as the best benchmark for physical gold demand in the Chinese market.  Not to mention that the entire 2013 global mined gold production does not exceed 2700 tons. China’s massive demand has to a large extent remade the world’s gold circulation system. Newly mined and stocked gold is moving through trade links in London – Switzerland – Hong Kong – into China in a large scale orientation towards the East. The impact of China’s demand on international gold price will inevitably increase.

Why consumer demand as presented to the world has been understated since 2008 is because the China Gold Association is manipulating the demand category net investment to suppress other categories like jewelry andbar.  This is an overview from the China Gold Market Report 2010.

Chinese gold demand 2010

According to the China Gold Market Report 2007 net investment was 18 tons. Thomson Reuters GFMS (which is the sole data provider for the WGC), assumed this was gold added to the stocks of banks, jewelers and the mint, as it was withdrawn from the SGE vaults but wasn’t sold on retail level. In 2007 this was probably true. But when Lehman fell the world changed, the Chinese began to overstate net investment to hide true demand. Up until today GFMS states net investment is stock movement changeLet’s have a look at how much net investment was in recent years. Note, in the chart below the “Difference” is approximately net investment, calculated as SGE withdrawals minus WGC consumer demand minus industrial demand. 

SGE withdrawals vs WGC

Actual net investment published by the China Gold Market Reports: 2007 – 18 tons, 2008 – 129 tons, 2009 – 147 tons, 2010 – 266 tons, 2011 – 285 tons.

From 2007 – 2013 net investment was roughly 2000 tons. This definitely can not have been stock movement change at banks, jewelers and the mint. According to my analysis this gold was bought at the SGE by investment funds, individual investors and jewelers pretending to be individual investors. In the mainland there is 17 % VAT on jewelry, plus an additional 5 % consumption tax – you do the math.

WGC gold

I contacted the WGC and got in touch with one of their experts based in China. When I asked him what net investment was we had a brief debate after which he had to admit he was clueless on where this gold was going. He told me the Chinese will never disclose this information. I asked him if he would like to collaborate with me to research net investment. I got no response. A week later I asked him if he would grant me permission to publish our email correspondence. He responded to not publish our correspondence as it was meant to be private.


In the meantime I was emailing a precious metals analyst from Thomson Reuters GFMS about the Turkish gold market. This gentleman was extremely kind and helpful and explained to me in detail how GFMS measures Turkish gold coin production. Very valuable information for me! When I asked him what his take was on Chinese net investment, I got no response.

CPM Group

Jeff Christian from CPM Group did respond after I wrote him an open letter regarding SGE withdrawals. You can read our debate in the comment section of this post. Not surprisingly we couldn’t agree. What was interesting about our conversation was that he said total Chinese net gold import in 2013 was 1411 tons.


Of course I’ve written a million emails to the CGA, in English and Chinese, no response whatsoever. I called them speaking English, no luck. My friend in the mainland has called them numerous times, they always say the gentleman who wrote the China Gold Market Reports is on holiday. The message is clear…

The mainland officially net imported 1112 tons of gold from Hong Kong in 2013. Total net import according to Jeffrey Christian was 1411 tons (according to me it was 2000 tons), let’s take his number for an example. How can China import 1411 tons and mine 428 tons (that’s 1839 tons) but only demand 1066 tons? Did they import gold without asking for it? Did someone secretly pushed it across the border and now the Chinese are stuck with it? Or is there a lot of demand the WGC doesn’t disclose?

Anyway, I think 1066 tons Chinese consumer demand as reported by the WGC is highly underestimated. To be continued…

In Gold We Trust

China and Japan data might give an excuse to smash the PMs .....

China Manufacturing PMI Misses, Tumbles To 7-Month Low

Tyler Durden's picture

If there was any doubt that it was also snowing in China this winter, the February Flash HSBC PMI, which tumbled from 49.5 where it was expected to print, to 48.3, a seven month low, just sealed all meteorological conundrums. And with every sub-index decreasing or deteriorating, it is no surprise that headline index tumbled.
At 48.3, this is the lowest since July of last year with the employment sub-index the lowest since Feb 2009.
The commentary from Hongbin Qu, Chief Economist, China & Co-Head of Asian Economic Research at HSBC, was about as dire as could be:
“February’s flash reading of the HSBC China Manufacturing PMI moderated further as new orders and production contracted, reflecting the renewed destocking activities. The building-up of disinflationary pressures implies that the underlying momentum for manufacturing growth could be weakening. We believe Beijing policy makers should and can fine-tune policy to keep growth at a steady pace in the coming year.”
Markets are not happy that the dream of a sustainable escape velocity growth miracle is not coming true and for now bad news is bad news (as The Fed's minutes suggested they will - just as Yellen stated and the market ignored - stay the course on the taper). USDJPY and the Nikkei 225 has erased all their post-BoJ gains on this news.

USDJPY and Nikkei 225 have erased all gains post BoJ

S&P futures are also fading fast as they recouple with USDJPY as it tests the critical 102 level... 27 points off today's highs


Japanese Trade Deficit Explodes To Record - No J-Curve Miracle In Sight

Tyler Durden's picture

With exports up 9% but imports up a massive 25% YoY, Japan's Trade balance pushed to its largest deficit on record. This is the 2nd largest drop in the trade balance on record - beaten only by March/April 2011 (the Tsunami and Fukushima). The miracle of the J-Curve (the hoped for recovery in exports that will come any minute now from the devaluation of the currency) is simply non-existent!! We love the smell of GDP downward revisions in the morning... Foreigners sold Japanese stocks for the 4th week in a row for the first time in 16 months.

19 FEBRUARY 2014

Gold Daily and Silver Weekly Charts

There was no movement in or out of the Comex gold warehouses yesterday. At some point they must debit the delivery of bullion to the February longs which have stood for delivery.

Gold and silver were short term overbought yesterday, and so a pullback is not all that surprising. It was interesting to see the precious metals moving with stocks today, as gold at least had been working as a counterplay flight to safety.

The 200 DMA for gold is around 1309, and so we would like to see this level hold on this retest and retrenchment.

Have a pleasant evening.


  1. Trading in Stock Market for gold is that Gold trading range for the day is 29580-30376.

  2. Strange comment above and I hope I'm not giving them encouragement somehow by adding a comment.

    Good morning,

    Interesting that Gold has been able to hold over 1300, I'm not sure but I would think that was a positive development "Arab spring" does seem to be spreading, I'm still wondering which ones are sponsored by the western bankers and which are more "natural". Ukraine for sure, Thailand probably not? IMHO, anyway which is subject to change.

    Glad you got the snow shovel workout and not me, my pulled thigh muscle isn't healed yet. Maybe next week it will be my turn again. Have a good day.