Shanghai Exchange Chairman Admits China Gold Demand Topped 2000 Tonnes In 2013

Tyler Durden's picture

Submitted by Koos Jansen via BullionStar.com,

This is the final blow for the ones who still couldn’t comprehend, after all evidence presented, the amount of Chinese non-government gold demand in 2013. At the LBMA forum in Singapore June 25, 2014, one of the keynote speakers was chairman of the Shanghai Gold Exchange (SGE) Xu Luode. In his speech he made a few very candid statements about Chinese consumer gold demandthat according to Xu reached 2,000 tonnes in 2013. In contrast to the Word Gold Council (WGC) that states Chinese gold demand was 1,066 tonnes in 2013. Xu's speech has now finally been translated and published in the LBMA magazine The Alchemist #75. 

Xu's statements once again confirm what I have been writing for months. SGE withdrawals equal Chinese wholesale demand:

import + mine + scrap = total supply = SGE withdrawals = wholesale demand

Let's go through a couple of quotes from Xu:  

Data on China’s gold imports has not previously been made available to the public. However, gold has historically been imported through Hong Kong, and Hong Kong is highly transparent, disclosing details such as the number of tonnes of gold imported on a monthly basis. Last year, China imported 1,540 tonnes of gold. Such imports, together with the 430 tonnes of gold we produced ourselves, means that we have, in effect, supplied approximately 2,000 tonnes of gold last year.

 

The 2,000 tonnes of gold were consumed by consumers in China. Of course, we all know that the Chinese ‘dama’ [middle-aged women] accounts for a significant proportion in purchasing gold. So last year, our gold exchange’s inventory reduced by nearly 2,200 tonnes, of which 200 tonnes was recycled gold. 

Again, we can read the simplified equation (for 2013):

import (1540t) + mine (428t) + scrap (229t) = SGE withdrawals (2197t)

Additionally, it's very clear what kind of metric the SGE uses. Xu subtracts recycled gold from SGE withdrawals to measure consumer demand, which equals newly added gold (import + mine = 1968t) to the private holdings of Chinese citizens. Confirming the Chinese gold market with the SGE at its core, is designed by the PBOC to track the quality and quantity of gold held in non-government reserves.  

By flipping the variables in the formula I was able to estimate Chinese import in 2013 (SGE withdrawals - mine - scrap = import) by an error margin of only 2.6 %. Year to date SGE withdrawals account for 1425 tonnes, of which I estimate 855 tonnes was imported. Western media are still focusing on the amount of gold Hong Kong net exports to China, which is dropping like a brick, as a proxy for Chinese imports. However, this data has dramatically lost its significance as China has openly announced it imports more gold directly into cities like Shanghai and Beijing. This was clearly communicated, see the next video from 1:14.

 

 

The Shanghai Customs department published a press release September 19 on their website saying they imported 48 batches of gold in the first eight months of this year worth $15 billion dollars, which roughly translates to 380 tonnes. Unfortunately the article does not say where this gold came from, but it very well supports the fact China continues to import large amounts of bullion, which can be seen by strong SGE withdrawal data. in September import has increased 30 % m/m. 

 

  

The strange thing is, there were many industry professionals and journalists in the room when Xu spoke at the LBMA forum (click for the delegate list), but only one of them rushed to his laptop during the break to share the content of Xu's speech, paramount information. He sent me an email that I immediately published for the whole world to read. This person was my friend and CEO of BullionStar, Torgny Persson.

However, there still hasn't been a single mainstream news outlet that has covered the immense discrepancy between the Chinese demand numbers from the WGC and the SGE. I would like to express my deepest concern about how the mainstream media is covering the (Chinese) gold market. Xu stated, at the most prominent precious metals forum in the world, Chinese gold demand reached 2,000 tonnes. How could the press have missed this? By the way, later on in his speech he repeated it twice! 

Earlier, I have reported on the data that physical gold consumption in China’s gold market has, in effect, reached more than 2,000 tonnes last year.  All of you here are experts in this industry and are very clear about the percentage accounted for by these 2,000 tonnes of physical gold in the global market.

The difference between WGC and SGE Chinese non-government gold demand is 1,000 tonnes. Go figure.

The first publication I posted about what Torgny emailed me from the LBMA forum can be found here. In the comment section underneath there is a conversation with Bron Suchecki who also listened to Xu's speech, however, he (and one other journalist) couldn't recall Xu saying Chinese demand hit 2,000 tonnes. Fortunately we have it in black and white now; Xu said it three times and other SGE officials have made the same statements.

I would recommend everyone to read the entire speech from Xu (here). 

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SilverIsMoney's picture

Koos Jansen was right...

ZH Snob's picture

the SGE doesn't have to break the comex.  they will go the way of Kodak soon enough.

kliguy38's picture

big news boyz n girlz.......checkmate Chinese style

Soul Glow's picture

Trust your local Goldman Sachs to pay your GLD shares in gold.

Muahahaha!

SumTing Wong's picture

Is it just me, or does your stack look a little shinier too???

GetZeeGold's picture

 

 

Trust your local Goldman Sachs to pay your GLD shares in gold.

 

Yeah.....you'll take the check and like it.

TruthHunter's picture

To me, the big question is, why doesn't this 2000T impact price?

What sort of backroom deal sells this much physical 

metal in a down market? Is this some kind of pay off for China

sucking up all those soon to be worthless FRN's?

 

This kind of thing is why I"m not heavily invested in PM's.

The big boys own most of it; enough to set prices.

 

Soul Glow's picture

Yeah Yellen is printing strength into the dollar.  

King dollar!

Croesus's picture

Gold should definitely drop on this news...

fockewulf190's picture

I'm sure they've hooked up the M-5 algo computer this weekend. No need for humans. What could possibly go wrong?

http://en.m.wikipedia.org/wiki/The_Ultimate_Computer#/image/File:STUltim...

escapeefromOZ's picture

The 2000 tons are only the Chinese population requirement . How much the Chinese government buy ?
The total world production is 2700 tons . It would be interesting to know
if between China and India's population requirements the figure of 2700 ton was exceeded !

TeamDepends's picture

"If you can't put your hands on it, some homo is throttling it." Pretty sure that is what he said.

philipat's picture

Kudos to Koos who worked out from his own research the simple equation for wholesale demand before anyone else. Meanwhile the MSM propoganda (Planted by The Fed) continues to use exports from Hong Kong as the basis for making the claim that "Chinese demand for Gold is collapsing". Pathetic really....

Incidentally, Koos also recently confirmed, based on reliable sources, that PBOC does NOT buy Gold for reserves through the SGE. Koos had long speculated that to be the case because PBOC wants to recycle its USD reserves into Gold. SGE is RMB based so only buying Gold offshore would serve that purpose, Now confirmed.

So that means that TOTAL Chinese Gold demand in 2013 (Wholesale plus PBOC) was probably of the order of 2,500 Tonnes. As Ruprecht would say, "That's a lot".......

RafterManFMJ's picture

Pretty amazing how only a handful of people have any interest in reporting and researching what may be the seminal event in the demise of the West.

Hulk's picture

Barbarians !!! All 1.4 billion of em !!!

Soul Glow's picture

It's sophisticated to like the dollar.

Hulk's picture

Damn Straight ! and we also know how to launch a lifeboat properly !!!

Pladizow's picture

Seems strange to now mention it 3 times?

ZH Snob's picture

cool.  wait till they release what the govt has.  they will do that and double the price of gold then tell the lbma if they don't like it, arbitrage it!

techstrategy's picture

This is going to escalate quickly.   Game on.

 

 

Cautiously Pessimistic's picture

I bet maritime insurance in China is through the roof!  With all the boating accidents going on....

RaceToTheBottom's picture

Hmmmmm, I wonder if Gold and Silver get etched and discolored when submerged in Chinese rivers and lakes?

Anyone know how they would react in the levels of polution?

BrerRabbit's picture

I believe the material gets impregnated with Tungsten.

hendrik1730's picture

Yep. It wouldn't react at all, that's why it's a noble metal.

Creepy A. Cracker's picture

They will soon own us.  Even the peasents.

Cynicles's picture

bah. Øsurper will just throw don another Red Line. Problem solved. Besides, the US has so much gold on hand...

OK, well they should as they hold vast amounts for so many nationsand refuse to return any of it to them; another nice  ploy by the Gov. 

Fractional reserve gold storage??? WTF 

RaceToTheBottom's picture

Why not?  We have Fractional Reserve Gold ETFs

r0mulus's picture

What if domestic demand can be satisfied by gold production safely in the hands of Western interests, while the real productive assets gotten by fractional reserve against the pre-existing gold satisfies the demand for other things and generates in that way, wealth? It seems such a solution would be the kind of out the FED and it's allies would be looking for...

I don't say that spoil anyone's parade. I'm entirely sympathetic to real math and acknowledge the existence of scarcity. Just have to play Devil's Advocate cause I'd rather those in the real math and scarcity existing camp to not make any compromising mistakes...

gwar5's picture

2000 tonnes a year a year for China and India is being left in the dust. 

So the total world demand for gold is already way over the production availability. Excess must be coming from the last of GLD and Fed vault floor sweepings at this point. It's going to "Shock the world' when this gets around that Sprott was right.

 

Al Huxley's picture

India's CB agreed to give up their own holdings (550 tons?) to supply domestic demand, and replaced it with 550 tons of paper gold promises from London, plus the key to the LBE executive washrooms (with the understanding that they will check them hourly, and keep them spotless).

10mm's picture

Go Shanghai. 

Soul Glow's picture

That's a lot of gold.

limacon's picture

Will gold help against ebola ?

Yes . Paper bribes are not worth ...

Though the Chinese will take credit for the poor man's Hazmat suit (Mongolia is part of China by their reckoning)

This has been historically battle proven . It might save some lives  Regards Andre xxxxxxx http://andreswhy.blogspot.com/2011/07/rotting-clothing.html https://www.academia.edu/8743634/Ancient_Mongolian_Hazmat_Suit
california chrome's picture

Ebolma made a deal with the Chinese: You buy our treasuries and we'll depress the gold market for you to buy it all up, lock, stock and barrel.

ZH Snob's picture

looks like the chinese have reneged.  they don't seem very interested in treasuries any more.

Wizard of Ozman's picture

1.2 Trillion Dollars begs to differ. I will say you are right the pile of paper is slowly decreasing. And my ass you can't trade RMB for dollars and do stealth deals on the Shanghai. Just not with huge positions. This be crazy shit. 6.06

RaceToTheBottom's picture

The deal was not to buy any more Treasuries.  It was to not dump their previous purchases.

Ignorance is bliss's picture

Probably because the U.S. does not have a lot of gold left.

holdbuysell's picture

And the Grasshoppers of the West are doing what?

Hulk's picture

Hop for your life ! Here come the chickens !!!

BettingTheFarm's picture

So how much of it is going to the CB's reserves? My understanding of this article is that the entire quantity of 2197t is used by private citizens, and probably includes industrial use. That can't be right.

hotrod's picture

WGC was 100% Wrong.  Somebody call Sprott.

Al Huxley's picture

So they bought all the gold supplied by mines, no big deal right, nobody else wants it.  I see more clearly now the wisdom of those arguing that current price is just a reflection of supply and demand dynamics.

hotrod's picture

You can bet that is why India was put on Gold restriction last year and not about their current account deficit.