Visualizing China's Voracious Appetite For Gold

Tyler Durden's picture

Last week ZH reported on China's seemingly insatiable apetite for physical gold, following record imports from Hong Kong (erroneously noted by various blogs as not covered by the mainstream media - we first got the data from Bloomberg, hardly a fringe source of information). As noted: "Gold imports by mainland China from Hong Kong climbed 65 percent to a record in April, advancing for a third straight month as investors sought a hedge against financial-market turmoil and an economic slowdown. Shipments totaled 103,644.5 kilograms (103.6 metric tons) in the month from 62,913 kilograms in March, according to export data from the Census and Statistics Department of the Hong Kong government today. In the first four months, imports were 239,174 kilograms from 27,114 kilograms a year earlier, according to Bloomberg calculations. China doesn’t publish such figures." And the punchline of course was "We can’t rule out the possibility that the central bank is buying gold,” said Wang at Agricultural Bank of China, referring to the People’s Bank of China." So far so good. However, one thing we did not have was a visual presentation of China's relentless gold hoarding. We now do courtesy of Eric Sprott.

And more from Sprott and his latest letter:

There have been key developments in the physical gold market over the last few weeks which we feel are worth highlighting:

1) The Chinese gold imports from Hong Kong in April, 2012 surged almost 1300% on a YoY basis. Total gross imports for the month of April were 103.6 tonnes and the net imports were 66.3 tonnes. It is not the data for April alone which has caught our eye. There has been a stunning increase of gold imports through Hong Kong for export into China over the past 2 years. Between May 2010 and April 2011, China imported a net 66 tonnes of physical gold through Hong Kong. Between May 2011 and April 2012, that number jumped to 489 tonnes. This represents an increase of 640%.

2) Central banks from around the world bought over 70 tonnes of gold in April, 2012. Data from the IMF showed developing countries such as the Philippines, Turkey, Mexico and Sri Lanka were significant buyers of gold as prices dipped.

3) Iran purchased $1.2B worth of gold in April, 2012 through Turkey. As the developed nations continue devaluing their currency at the expense of developing nations, countries such as Iran, China and Mexico are forced to look at alternative stores of value.

4) After twenty years of lackluster returns and stagnant bond yields, Japanese pension funds have finally discovered the value of investing in gold. The $500M Okayama Metal and Machinery pension fund placed 1.5% of its assets into gold bullion-backed ETFs in April in order to "escape sovereign risk".

5) Bill Gross writes, "Soaring debt/GDP ratios in previously sacrosanct AAA countries have made low cost funding increasingly a function of central banks as opposed to private market investors. Both the lower quality and lower yields of previously sacrosanct debt therefore represent a potential breaking point in our now 40-year-old global monetary system. […] As they (investors) question the value of much of the $200 trillion which comprises our current system, they move marginally elsewhere - to real assets such as land, gold and tangible things, or to cash and a figurative mattress where at least their money is readily accessible". Is the bond king recommending gold? YES, YES YES!

6) The Gold Mining ETF, GDX, has seen strong inflows in the past 3 months. The number of units outstanding have increased from 162.5M to roughly 187M between March 1, 2012 and May 31, 2012. This represents an increase in assets of almost $1.2B in a span of 3 months. It is worth pointing out that for a majority of this three months period, GDX, and by extension the gold mining companies were experiencing significant declines in their market values.

We believe there has been a material change in the gold investing landscape. The HUI, which is the Gold Bugs Index, is now up over 20% from its lows since May 16th, 2012. The slide in gold equities seems to be subsiding as a foundation for a strong move upwards is set. New buyers, represented by the Chinese, central banks, Japanese pension funds and the Iranians, bought almost 140 tonnes of gold in April alone. To put this into perspective, the annual gold production is approximately 2600 tonnes. China and Russia produce around 500 tonnes of gold annually, which never makes it to the open market. This leaves about 2100 tonnes of gold production annually for the rest of the world.

When buyers representing 140 tonnes of new demand enter a market which only has 175 tonnes of monthly supply, we are left wondering about two things:

1) In a balanced market, where is the source of supply to the new buyers going to come from?

2) How can a new buyer of size get into the gold market, which is already balanced, without significantly impacting the price of gold?

The answer is fairly obvious. When demand outstrips supply, prices move higher. These significant macro changes in the supplydemand dynamic of the gold market should propel the price of gold to new highs.

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SilverTree's picture

The Golden Rule.

Short Memories's picture

Now we just need JPM and Co to go bust and we're in the money!

fireangelmaverick's picture

On a related note, did anyone else see Kelly Overton's magnificent assets on True Blood yesterday?

fireangelmaverick's picture

Hey why the Vote downs? I thought we were discussing priceless assets.

prole's picture

(OK erase dumb comment here and GIS said "assets")

BalanceOrBust's picture

So why the repeated beat down on PM's?

GoldMeUp's picture

Why does the chart say "Exports"?

edit: never mind, I get it, these are the exports from Hong Kong to the mainland, which could possibly be going to the PBC.

sessinpo's picture

Well, actually there can be exports to outside on China. Let me put it to you this way. The US exports oil. Yet we also import oil.

unwashedmass's picture

in the world according to Blythe and JP, jus' cause the demand increasing and supply is...well, imaginary at this point....


it don't mean the price is gonna rise.....

not in blythe/jpm world....with all the taxpayer cash to stop it, and the assets of 325 million peasnats you can confiscate to stop it......

Ted Baker's picture


Dr. Engali's picture

All this gold being pulled off the market it sure would be nice to see it break out of the range.

tarsubil's picture

I assume you are no longer a buyer? When it breaks, small fry will not be buying any more gold. Perhaps you're not small fry like me. I'm thankful myself that I can still buy.

lunaticfringe's picture

Two chinks in this armor. Rehypothecation means that the bullion banks with a wink from the government have essentially levered gold- God knows how many times. This ridiculous overstatement of supply is one of the reasons we can't even see the gold we allegedly own at Fort Knox. Nobody has seen that gold for decades. Why is hiding gold significant?

The other problem in addition to this overstatement of supply- is that gold is really fucking expensive. At 1600 bucks an oz. it is hard for one of those Chinese workers to just go out and pick up an ounce or two even though Apple is paying them really great wages-like a buck an hour at Foxconn. Now if we could figure out a way to export all of our government workers and suddenly make them Chinese  with Chinese wages- we'd be in tall cotton.  

Snidley Whipsnae's picture

"This ridiculous overstatement of supply is one of the reasons we can't even see the gold we allegedly own at Fort Knox. Nobody has seen that gold for decades. Why is hiding gold significant?"

Just a pet theory but I believe there are at least two reasons why US gold has gone unaudited since ~ 1955.

1) After WW2 the US accumulated an enormous hoard of gold from the world via manufactured exports (since the US manufacturing base was left standing and others were not)... It is not in the best interests of any country to disclose such a large hoard of gold when Europe, England, and the Far East were destroyed and many were starving.

2) Now the situation has changed and over many years the US hoard of gold has been frittered away in gold suppression schemes... What would be gained by telling the world that we have little or no physical gold left?

prole's picture

Now Lunatic F you tell me the Chinese are being exploited as slaves by mean old Apple, and for a dollar an hour no less. I believe you. I am sure you are not a liar; and I'm sure you wouldn't come on here and tell a bunch of lies like that Freddie Fucker.

Now that I understand the great masses of Chinese laborers are scrambling around trying desperately to survive on a dollar an hour, I am having great difficulty reconciling that fact, with this scene of Chinese elbow-to-elbow Like free wings night at Hooters lining up to buy gold bars, waving cash at the sales team.

Caution- Video shows scenes of extreme poverty and exploitation by evil corporations like AAPL. (Vid 2010)

boogerbently's picture

Anyone claiming manipulation is branded a "conspiracy" nut.

But doesn't massive buying of ANYTHING usually RAISE the price ???

mayhem_korner's picture



If the PBOC is buying gold, does that make them terrorists?  I'm just wondering if we need to get the Miranda Rights published in Mandarin...

Ratscam's picture

No, gold is just a barbaric relict ....

Abitdodgie's picture

Demand in gold means nothing to the price , gold will stay at the price they want it to , end of story.

sessinpo's picture

"The answer is fairly obvious. When demand outstrips supply, prices move higher. These significant macro changes in the supplydemand dynamic of the gold market should propel the price of gold to new highs."

Or rehypothecation until someone gets caught with the pants down when they can't deliver the physical. Isn't that what the gold ETFs are about? Anyway, hold your PMs. It should be an interesting ride over the next year or so.

LULZBank's picture

What happens if the price of Gold exceeds the value of goods and services in circulation?

Snidley Whipsnae's picture

"What happens if the price of Gold exceeds the value of goods and services in circulation?"

Whatever happens you can rest assured that the gold's purchasing power will never go to zero...

and, zero is where all fiat currencies purchasing power does end.

The name of the game now is Wealth Preservation... as far as that is possible.

Good Luck to us all, we're gonna need some...

eclectic syncretist's picture

While the central bankers are playing games with what you might call "paper gold certificates" the real gold is flowing into china and other countries that don't allow these games..

Snidley Whipsnae's picture

Correct you are, ES... If you look at my posts from a couple of years back I was pointing out exactly what you are pointing out now.

The Fed and other CBs have to attempt to keep the 'paper' price of gold down through suppression schemes, otherwise, gold would have already soared and fiat would have been exposed as the sham that it is.

China, and others, are taking advantage of the CBs paper gold suppression schemes to take physical delivery of all the gold that they can get at the lowest prices that it is available at.

Fed fiat prop job = gold leaving for foreign destinations, never to return.


RobotTrader's picture

PM's getting slaughtered during this brief "Risk Off" episode.


Gold Bugz better hope for an immediate reversal in credit spreads and ES futures.

fuu's picture

"Gold Bugz better hope for an immediate reversal in credit spreads and ES futures."


Naw, let the sales continue.

oddjob's picture

Gold still has to fall to 60% from here to match your much ballyhooed Netflix losses.

Spitzer's picture


We have to deal with this paper gold until it is exposed for the paper that it is. After that, the COMEX price will fall to $20 an oz and a real market will price physical.

Richard Head's picture

You're a complete shithead.

eclectic syncretist's picture

Gold is a put against the fractional reserve banking system practiced by central banks, including the Fed.  These institutions were created to parasitize entire populations and givernments, not to foster economic growth.  They have been so successful they are on the verge of killing their hosts, or at least hopefully of awakening them to the danger they pose.  One day China will let it be known that they actually have a LOT more gold than anyone anticipates, and when that happens the price will explode.

However, they are quietly accumulating now.  Very smart.  Don't want to put up the price on yourself until you see it's no longer possible to quietly accumulate.  Then make the announcement and sit back and watch the fireworks!

Sophist Economicus's picture


Gold is a put against the fractional reserve banking system practiced by central banks, including the Fed.  These institutions were created to parasitize entire populations and givernments, not to foster economic growth


This is not true.   The FED was required to have a 40% gold backing to FRNs.   The percentage of gold backing to FRNs could ONLY BE removed by Congresss, which they did time and time again so that CONGRESS could spend, spend, spend on their favorite social and military programs.     It was CONGRESS that removed the gold backing from the FRNs in circulation.

The FED was only to have self liquidating short term commercial bills on its balance sheet - the shift to Treasury bills and then Notes (long term debt) was an evolution to accomodate the drunks in congress and the white house.     You may not like central banking, but your vilification should be based in facts.

Alpha Monkey's picture

Well, I guess it just matters how far back we go.  For a little over the first half America's life, there was strong opposition to central banking.  Where did this come from?  Probably a little foresight on what was to come, based on how banks had attained power and wielded it through the governments in the past.  Predatory lending is nothing new to the world, it probably pre-dates money itself.  The many, many cases of sub-prime lending show that professional bankers (which is what central bankers are) are not above this practice.  I would even argue institutions like the IMF are sub-prime lenders for governments.  It's pretty clear to me why he chose what he chose to vilify.  Perhaps they just move too slow for you to notice.

DaveyJones's picture

It's like... the opposite of their TBill hunger

ArrestBobRubin's picture

Looks like Risk off silliness is settling in on PMs. Thereby enabling China's NEXT massive buy.

Is the partial payback to China for all the crap we sold 'em the migration East of all "bullion bank" gold at 10 - 20 % of its true value?

Or is that the global elite are already there and their gold is following them over.

Are a few leading banksters already carrying PBOC business cards?

uno's picture Chinese offer £1.3bn for metal exchange Speculation is mounting that global metal prices could fall under the influence of China – the world’s leading consumer of commodities – following a bid for the London Metal Exchange.

I certaninly don't agree with the falling metals prices, but interesting bid, hope China gets it, probably no gold there, only IOUs

Quinvarius's picture

I think that deal was already denied.  Plus, I don't think they want China seeing the books anyway.

Overfed's picture

With the spread between silver and gold holding at around 56:1, I'm buyin' silver like it's going out of style.

Once everybody pulls their head out and sees what China has done, silver will return to it's historical 16:1 ratio. I hope. Or, I'll own a whole lot of pretty paperweights to keep my fiat from blowing away during a picnic.

Alpha Monkey's picture

So, why not just buy gold? At least your paperweights will never lose their luster.

TradingTroll's picture

"103,644.5 kilograms"


annualized thats 1.2m kilos or 1.2 billion grams


1.3bn people in china


so they are buying under a gram a person per year. about $50/person.

not as big as you'd think.


While the central banks are hoarding gold bars, the consumer demand for Chinese Gold and Silver coins is simply astounding. In just the past year we have already seen a Modern Chinese Gold coin sell for a bullion value of $42k/oz.

oldgasII's picture

Gold is a temporary soothing butt creme for those Chinese trying to save for their old age.  If they put their money in a Chinese bank savings account they get a negative interest. They went for real estate but that's facing an end of the bubble also.  The Chinese government uses money that they steal through the State Owned Enterprises to purchase US Treasury's.  The low payout on the Treasury is a big positive when you get the money to buy it at a -3% through various scams of the populace.  Buy letting people buy gold they are also trying to stem capital flight overseas into hard assets that they don't control.  

If I had the money and no morals I'd set up a Gold ETF in Taiwan or S.Korea for the Chinese market. 

kekekekekekeke's picture

20 metersy'all

game on


Fuckin chinaman, looks like he fooled whitey once and for all. I think we can suspect lower prices until china feel they have accumulated enough then booom goes the petrodollar and hello yellow money. You know its over with the paper regime when cbs start stacking.

Keep building them stacks, yellow if conservative and silver if balls of steel. I got brass balls if you know what i mean...

I wonder how saudia arabia will hold up when all is said and done? They might be abit slow but they sure know how to pick a winner...


Paper sucks, you Wall Street fucks! I'll see you vampires in the sun, with my loaded silver gun. Yer goin' down in flames, from Lower Manhattan to the Thames. Your paper is I know not where, I'd rather shit my underwear! For, be there bull, or be there bear, silver is the suit I wear! (With gratitude, and apologies to Dr. Seuss.)


The only paper I own is the stuff I wipe my ass with. Market paper is worthless, because I cannot do a good job of wiping my ass with it. Gold was worth $28.00 an ounce when I was a kid. Silver was worth whatever was printed on the coin you spent. Any one think those days are coming back? All of the lying bum fucking aristocracy of the Age Of Paper Power can burn in their paper suits soonest. I won't even bother pissing on them to put out the flames.

I collect gold, silver, lead, copper, real dry powder, food, tools, diesel fuel, and other useful commodities. There is a community of folks all doing the same, so skill sets and extra eyes and hands can guard each others sixes, and "break on through to the other side, break on through to the other side, YEAH

HFT ain't good for me.

Credit defaults far as the eye can see.

CDS's gonna make some messes.

Boo hoo hoo as thieves confesses.

TBTF gonna fall off a cliff - REAL NEAT.

Wall Street is a bunch of fucking dead meat.

Banks used to be so overleveraged bold.

Now, they're layin' bankrupt,dead and cold. 

Gonna be nothing but prepper people,

all the rest gonna be surprised fucked up Sheeple.

God bless this mess.

I must confess.

I'm a fucking poet,

and didn't even know it.