24 oktober 2016 2 22 AM gld. Gold data för utbud och efterfrågan som publiceras av alla primära konsultföretag är ofullständiga och vilseledande. Företags - och efterfrågadata presenterar falskt guld för att vara mer av en vara än en valuta. Detta råvaruförfarande har Orsakade djupa missuppfattningar i förhållande till metallets handelsegenskaper och prisbildning. Numera konsulter runt om i världen, till exempel Thomson Reuters GFMS, Metals Focus, World Gold Council och CPM Group, tillhandahåller fysisk guld - och efterfrågestatistik tillsammans med en analys av denna statistik i förhållande till priset på guld Som en del av analysen presenterar företagen utbud och efterfrågan som visar hur mycket guld som säljs och köps globalt, indelat i flera kategorier. Det antas i stor utsträckning att dessa saldon täcker den totala fysiska utbudet och efterfrågan , Vilket är felaktigt eftersom den viktigaste kategorin är utesluten. Företagen föredrar emellertid att inte dela den subtila sanningen eller deras affärsmodeller skulle b e är allvarligt skadad. Leverans - och efterfrågesaldorna från företagen visar att guld är mer av en vara än en valuta, eftersom balansen i mängden reflekterar hur mycket metall som produceras jämfört med konsumtionen - sättas annorlunda, fokuserar företagen huvudsakligen på hur mycket guld Minas i förhållande till hur mycket som säljs i nyfabrikerade produkter Men i verkligheten är guld evigt och kan inte förbrukas förbrukat. Allt som någonsin har bryts är fortfarande över marken noga bevarat i form av barer, mynt, smycken, artefakter och industriella Produkter På grund av den här egenskapen har den fria marknaden valt guld för att vara pengar för tusentals år sedan, och som pengar är majoriteten av guldhandeln genomförd i överjordiska reserver. Det är otvivelaktigt att total tillgång och efterfrågan på guld ligger långt över minproduktionen och detaljhandeln Efterfrågan. Som de flesta enskilda investerare anser fondförvaltare, journalister, akademiker och analytiker av ädelmetaller att företagens saldon är komplett, den globala missuppfattningen om gold sup Lager och efterfrågan är en av episka proportioner Fysiskt guld är ett djupt ankare i vårt globala finansiella system och det är därför av yttersta vikt att vi förstår de fina detaljerna i sina handelsegenskaper. Tillhandahåll efterfrågningsmetoden av företagen. Företagen kan hävda att skillnaden Mellan vad de presenterar som utbud och efterfrågan SD, i motsats till vad jag anser vara en mer oblandad inställning av SD beror på kontrasterande mätvärden. Därför kommer vi att diskutera deras mätvärden för att avslöja deras svaghet. I ett nötskal räknar företagen bara den fysiska Guld SD-flöden som är lätta att mäta, men lämnar ut den viktigaste delen av institutionell utbud och efterfrågan. Trots att företagen alla har lite olika metoder för att mäta SD, jämförs siffrorna tycks vara ganska likartade. För vår fortsatta undersökning kommer vi att kolla på Mätvärden och modeller av GFMS Anledningen är att GFMS varit det enda företaget som var villigt att dela en fullständig beskrivning av deras metodik för offentliggörande - att ses här Metals Focus MF tillhandahöll en partiell metodologi, World Gold Council och CPM Group nekade att kommentera. Låt oss titta på GFMS: s SD-kategorier. På utbudssidan ingår. Minutillförsel, nyminerat guld. Skrapleverans guld från gamla tillverkade produkter. På efterfrågesidan ingår. Smycken kräver guldinnehåll som används i nyligen tillverkade smycken produkter som köps lokalt på detaljhandeln nivå, justerad av smycken som exporteras och importeras. Industriell efterfrågar volymen av guld som används i industriella applikationer, till exempel bindningstråd , Produkter som används i halvledarelektronik och dentala legeringar. Detaljhandeln investerar nettovolymet av barer som köps av enskilda investerare genom detaljhandelskanaler. Investera en kombination av publicerade data från minter och även en proprietär undersökning som genomförs av GFMS, där varianter säljs . De ovan nämnda fyra efterfrågekategorierna summeras ofta som företagens efterfrågan. Dessutom innehåller GFMS säkring förändring i gruvföretagens fysiska marknadseffekter guldlån framåt och optioner positioner offentlig sektor total centralbank sälja eller köpa. ETF inventering bygga förändring i ETF inventory. Exchange inventory bygga byte i utbyte inventory. The sista fyra kategorierna kan antingen leverera eller Efterfrågan I exemplet när centralbankerna i sin helhet är nettoförsäljare kommer detta att anges som en negativ efterfrågan, vilket visas i SD-saldot av GFMS nedan från 2006 till 2009, då centralbankerna totalt sett är nettoköpare Listas som en positiv efterfrågesiffror, vilket visas i balansen från 2010 till 2015 För en tydlig översikt över GFMS SD-saldo, se alla artiklar nedan. Klicka för att förstora Exhibit 1 Courtesy GFMS Global Gold SD-balans som beskrivs i Gold Survey 2016. Enligt GFMS Supply består av minproduktion Skrot och Net Hedging I sin tur består efterfrågan av Smycken Industrial Fabrication Retail Investering och Nät Officiell sektor Efter balansering Supply och Efterfrågan på detta resulterar i ett underskott i fysisk överskott. Sedan läggs ETF Inventory Build och Exchange Inventory Build till subtraherad från fysisk överskott underskott för att komma till en nettosaldo. GFMS gillar att låtsas att deras balans är komplett och ibland leda till eventuella överskott eller underskott som härrör från det är positivt korrelerat med priset på guld, vilket är allt annat än sant, som jag kommer att visa steg för steg. Företagen utesluter majoritetsguldleveransbehov. Det viktigaste av vad som är undantaget från balansen är vad vi ska referera till som institutionell utbud och efterfrågan , Som kan definieras som handel med bullion bland personer med höga nettoinvesteringar och institutioner. Vanligtvis kommer bullion i fråga 400 ounce 12 5 Kg London Bra Leverans NYSE GD-barer med en finhet av inte mindre än 995 eller mindre 1 Kg barer med en finhet av inte mindre än 9999 Dessutom kan bullion barer väga 100 ounce eller 3 kg, bland annat mindre populära storlekar, som vanligtvis har en finhet på inte mindre än 995, kan Bullion handlas utan att ändra sig i vikt eller finhet, men det kan förädlas och eller omarbetas för transaktioner, till exempel från GD-barer till 1 kg barer. I vissa fall institutionella utbud och efterfrågan innefattar gränsöverskridande handel när guldkull säljs i land A till en köpare i land B, i andra fall ändras gulden med ägande utan att röra sig över gränserna. Det finns två exempel på institutionella S D. En institutionell investerarorder 400 kg Av guld i sitt tilldelade konto hos en bullionbank i Schweiz - som skulle köpas på den schweiziska grossistmarknaden troligtvis i GD-barer. Denna typ av SD kommer inte att spelas in av GFMS. En kinesisk institutionell investerare köper 100 kg guld d Direkt på Shanghai Gold Exchange SGE, den kinesiska grossistmarknaden, i 1 Kg 9999 barer och drar ut metall från vaulten. Ingen av dessa transaktioner kommer att registreras av GFMS - eller någon annan firma. Dessa exempel visar att SD-saldon av GFMS är ofullständiga. För illustrativa ändamål nedan är ett diagram baserat på alla SD-nummer från GFMS från 2013 kompletterat med min konservativa uppskattning av institutionell SD Inklusive institutionella transaktioner totalt SD i 2013 måste ha nått drygt 6 600 ton. Klicka för att förstora Utställningen 2 Global Gold SD 2013 av GFMS, inklusive konservativ uppskattning institutionell S. D. GFMS täcker spåren med hjälp från LBMA. Även om GFMS intermittent medger att deras nummer är ofullständiga måste de samtidigt slåss för År för att förmörkas tydligt institutionellt SD för publiken Dauntless taktik behövdes när institutionell efterfrågan i Kina nådde ungefär 1 000 ton och över 500 ton i Hongkong. Institutionell efterfrågan i öst var övervägande erhållen genom GD-barer från London Bullion Market, som var Raffinerad till 1 Kg 9999 barer som är mer populära i Asien För omslaget gick GFMS i stor utsträckning för att åsidosätta volymerna av guld som drogs tillbaka från SGE-valv och följaktligen har London Bullion Market Association LBMA justerat statistiken över totalt raffinerat guld av medlemmen Raffinaderier Anmärkningsvärt samarbetade LBMA Låt mig dela min analys i detalj. Under 2013 hände något ovanligt i den globala g gamla marknaden som kinesisk institutionell efterfrågan exploderades för första gången i historia Hundratals ton institutionell försörjning från London i form av GD-barer sändes främst till Schweiz för att raffineras i 1 Kg 9999 barer, som därefter exporteras via Hong Kong för att träffas institutionell efterfrågan i Kina Från tulluppgifter från Storbritannien, Schweiz och Hongkong var det institutionella SD-spåret klart synligt. Från 2013 till 2015 fanns det till och med en stark korrelation mellan Storbritanniens netto guldexport och SGE-uttag som visat sig i tabellen nedan. Klicka för att förstora Exhibit 3 Korrelation mellan brittisk netto guld export och SGE uttag. På grund av mekaniken på guldmarknaden i Kina kinesiska institutionella efterfrågan ungefär lika med skillnaden mellan mängden guld återtaget från generaldirektoratet utsetts valv utställning 4, röda barer och kinesisk konsument efterfrågan uppvisar 4, lila barer I utställningen 4 nedan kan du se denna skillnad som förde GFMS i en quandary, särskilt sedan 2013 För mer information om hur den kinesiska guldmarknaden fungerar och storleken på den kinesiska institutionella efterfrågan vänligen hänvisa till mitt inlägg Spektakulärt Kinesisk guldbehov helt nekad av GFMS och Mainstream Media. Klicka för att förstora Visa 4 kinesiska grossistbehov SGE-återköp, jämfört med GFMS-konsumenternas efterfrågan jämfört med tydlig leverans. Stort sett har GFMS sedan 2013 försökt övertyga sina läsare genom många argument, varför SGE-uttag gick över 2000 ton i tre år i rad, medan den kinesiska konsumentens efterfrågan Nådde ungefär hälften av detta. Argumenten har dock misslyckats för att förklara skillnaden - de rationaliserar bara en bråkdel, läs det här inlägget för mer information. Och GFMS gjorde mer för att förmörkas tydligt institutionellt SD. De samarbetade med LBMA. För att vara tydlig kan jag inte Exakt mäta globala institutionella SD men låt mig göra en uppskattning av tydlig institutionell efterfrågan för 2013. Anmärkningsvärd år 2013 en översvämning av guld korsade världen från väst till öst kinesisk institutionell efterfrågan stod för 914 ton och Hongkong netto importerade 579 ton - den senare Vi kommer att använda som en proxy för ytterligare asiatisk institutionell efterfrågan, eftersom Hongkong är det dominerande guldhandeln navet i regionen. Den totala uppenbara institutionella efterfrågan under 2013 stod för 914 579 1 493 ton. Om vi lägger till alla andra efterfrågekategorier av GFMS som visas i utställning 1 var den totala efterfrågan 2013 minst 6 619 ton. Observera att detta inte utesluter en uppenbar institutionell efterfrågan. klicka för att förstora. Exportera 5 globala guld efterfrågan 2013 av GFMS, inklusive tydlig institutionell efterfrågan. Eftersom nästan all efterfrågan på grossistguld i Hongkong och Kina är för 1 Kg 9999 bar arbetade den globala raffinaderiindustrin övertid 2013, främst för att förfina institutionella Och ETF-försörjning i GD-stänger som kommer från London I december 2013 intervjuade jag Alex Stanczyk från Fysiska Guldfonden, som just tidigare hade talat till chefen för ett schweiziskt raffinaderi. Stanczyk berättade vid det tillfälle brackor som jag lagt till. De sätter på tre skift, De arbetar igen 24 timmar om dygnet och ursprungligen tänkte han raffinaderiets chef att det skulle gå ner på en stund. De har gjort det hela året 2013 Varje gång han tror att det kommer att sakta ner, får han fler order, mer Order, fler order De har utökat fabriken till där den nästan dubblerar sin kapacitet. 70 av sin kilobarfabrikation kommer till Kina, i takt med 10 ton i veckan. Det är från ett raffinaderi, kom ihåg att det finns 4 av dessa stora r Efinerier i Schweiz. Som en konsekvens är statistik över totalförädlad guldproduktion år 2013 av LBMA-ackrediterade guldraffinaderier som finns på Good Delivery List, som de fyra stora raffinaderierna i Schweiz är delaktiga, fånga de enorma flödena av institutionell SD - bredvid årlig minproduktion och skrotraffinering Den 1 maj 2015 avslöjade LBMA den totala raffinerade guldproduktionen av sina medlemmar till 6 601 ton för 2013 i ett dokument med titeln A Guide to The London Bullion Market Association Det är ingen slump att detta nummer ligger mycket nära min Uppskattning av den totala efterfrågan 6 619 ton, eftersom den uppenbara institutionella efterfrågan i Asien alla raffinerades från GD till 1 Kg-barer. Här visas 2 från en annan vinkel. Klicka för att förstora Utställningen 6 Global Gold SD av GFMS, inklusive synlig institutionell SD, jämfört med total raffinerad guldproduktion 2013. I tabellen nedan kan vi se LBMA-raffineringsstatistiken för 2013 vid 6 601 ton. Exhibit 7 Courtesy LBMA Skärmdump från En guide till The London Bullion Market Association fångad av Ronan Manly i maj 2015. Efter denna publikation var GFMS fångad av dessa raffineringsstatistik avslöjade en betydande del av de institutionella SD-flöden som de hade försökt dölja. Vad hände därefter - antar jag - var att GFMS vänligen frågade LBMA att justera ner sin raffineringstatistik Först och noggrant utsatt av min kollega Ronan Manly i flera djupgående inlägg, knäböjde LBMA och ändrade sin raffineringstatistik för att hålla charade på guldmarknaden. Den 5 augusti 2015 hade LBMA redigerat det ovannämnda dokumentet, som nu visar 4.600 ton totalt raffinerad guldproduktion Klicka här för att se det ursprungliga LBMA-dokumentet från BullionStar-servern, och här för att visa den ändrade versionen från BullionStar-servern. Ta en titt. Exponera 8 Courtesy LBMA Ändrad dokument om raffinering av statistik från LBMA augusti 2015. I den ändrade versionen står det. Total raffinerad guldproduktion av raffinaderierna på listan beräknades Vara 4 600 ton 2013, på grund av återvinning av skrotmaterial, över världsmyntproduktionen av 3,061 ton Thomson Reuters GFMS. A. några få viktiga anteckningar. I den ändrade versionen nämner LBMA en uppskattning av total raffinerad guldproduktion, medan den inte behöver Att göra en uppskattning eftersom alla LBMA-ackrediterade guldraffinaderier som finns på god leveranslistan krävs för att ge exakta uppgifter till sin förälderkropp. De exakta uppgifterna avslöjades i den första versionen av en guide till London Bullion Market Association. Den totala raffinerade guldproduktionen av raffinaderierna på listan var 6 601 ton. I den ändrade versionen konstaterade LBMA att raffineringsstatistiken hämtades från Thomson Reuters GFMS, men LBMA gör inte T behöver GFMS för denna statistik Det faktum de nämner GFMS föreslår dock ett samordnat skydd av institutionell SD. Inte bara företagen, även LBMA, publicerar ofullständiga och vilseledande data. Den ändrade versionen angav raffineringsproduktionen uppgick till 4 600 ton, vilket är en runda antal och uppenbarligen snabbt uppbyggd Ett par veckor efter att numren justerades justerade LBMA numren igen, den här gången till 4,579 ton, klicka här för att se från BullionStar-servern. Tydligen har det samråd med LBMA vid flera tillfällen för att få Statistik i överensstämmelse med GFMS. I originaldokumentet säger LBMA: s totala raffinerade guldproduktion av raffinaderierna på listan var 6 601 ton 2013, mer än dubbelt världsminproduktion av 3 061 ton, medan de i den ändrade versionen anger att de är totalt raffinerade Guldproduktionen av raffinaderierna på listan uppskattades till 4 600 ton 2013, på grund av återvinning av skrotmaterial, över världens minproduktion av 3 061 ton Notab Le, föredrar GFMS att ha totalt utbud fokuserat på min - och skrotproduktion, istället för att inkludera institutionell försörjning. Den ursprungliga raffineringsstatistiken 6 601 ton framgår fortfarande av LBMA-tidningen Alchemist 78 på sidan 24, som kan ses från LBMA-servern här. De fina detaljerna om hur ofta och när LBMA ändrade sin raffineringsstatistik kan läsas i Ronan Manlys utestående post. Flyttar LBMAs skiftande ställning på produktionen av guldraffinaderier. Och så sparas ingenting för att försvara uppfattningen av GFMS SD balans för att vara komplett I ett annat exempel utesluter GFMS guldköp från Kinas centralbank från dess SD-balans. I juni 2015 ökade People's Bank of China PBOC sina officiella guldreserver med 604 ton, från 1 054 ton till 1 658 ton. Under det kvartalet Q2 2015 alla övriga centralbanker över hela världen var nettoköpare på 45 ton Således var den officiella sektorn totalt 649 ton nätköpare. Nu ska vi titta på GFMS SD-balan Ance för Q2 2015. Klicka för att förstora Exhibit 9 Courtesy GFMS Global Gold SD Balans som beskrivs i Gold Survey 2015 Q2 Officiella sektorns inköp avslöjas med 45 ton GFMS beslutade att inte inkludera PBOC 604 ton ökning helt enkelt för att det inte passade Deras balansmodell Ett inkrement på 604 ton skulle ha satt nettobalansen på -480 ton Läsarna skulle ha ifrågasatt saldot från denna outlier och så GFMS bestämde sig för att inte inkludera tonnaget Enligt mina källor var PBOC-inköp härrörande från institutionell försörjning från utlandet Och inte via generaldirektoratet, vilket är en försörjningskategori som inte anges av GFMS och därmed var tonnaget ett problem. Notera, GFMS avslöja PBOC-inkrementet i text men inte i deras balans. För mer information läs min post PBOC Gold Purchases Separating Facts from Speculation. Gold är mer en valuta än en råvara. Den största bristen på balansmodellen av GFMS är att den avbildar guld för att vara mer av en vara än en valuta. Det s fokuserar Ed på minproduktion och guld återhämtat från gamla tillverkade produkter på utbudssidan, jämfört med detaljhandeln av nyfabrikat på efterfrågesidan. I företagsledning, hur mycket produceras utbudet jämfört med konsumtionsbehov Officiell sektor, ETF och byte av lagerförändringar är Läggs sedan i balans. Denna GFMS-saldo för SD-saldon har orsakat djupt rotade missuppfattningar om kärnan i guld och dess prisbildning. Priset på en lättfördärvligt råvara bestäms huvudsakligen av hur mycket det årligen produceras i förhållande till hur mycket förbrukade används. , Guld är evigt, det kan inte utnyttjas och dess växlingsvärde är huvudsakligen baserat på sina monetära tillämpningar, från att vara valuta eller pengar, om du kommer Logiskt är den största delen av sin handel genomförd i överjordiska reserver. Från mitt perspektiv är påverkan av den globala gruvförsörjningen, vilket ökar överlagret med ungefär 1 5 årligen och detaljhandeln har mindre att göra med guldets prisbildning än vad är wi dely antagits. Back to GFMS Ta en titt på bilden nedan som visar deras SD-flöden för 2015. Klicka för att förstora Utställning 10 Courtesy GFMS Den globala SD-strömmar för 2015.GFMS låtsas totalt utbud är minproduktion plus lite skrot som då möts Genom smycken efterfrågan utöver detaljhandel investeringar industriell fabrikation och offentliga sektorn inköp sättet som de presenterar det är vilseledande Dessa SD-flöden är ofullständiga De föreslår att guld handlas som någon annan råvara Men vad sägs om institutionella SD i ovanstående bullion Handlar som definierar guld som En internationell valuta. Låt oss göra en annan jämförelse den här tiden mellan vad GFMS kallar Identifierbar Investeringsbehov, bestående av. jämfört med vad jag anser vara ett mer obekväma tillvägagångssätt för efterfrågan på investeringar som består av. Retail bar coin. Institutional demand. Total globalt identifierbara investeringar, uppvisade en blygsam 5 ökning år 2015, för att nå 990 ton. Det är ganska ett tonnage mellan globalt identifierbara Investeringar av GFMS på 990 ton och tydlig kinesisk institutionell efterfrågan på 1 400 ton Vi bör också ta hänsyn till osynlig institutionell efterfrågan, guld som byter händer i handelscentrum som Schweiz Tyvärr kan vi inte alltid mäta institutionella SD men det motiverar inte att neka Dess livsuppehälle Ta en titt på tabellen nedan som visar den stora skillnaden I nästa kapitel ska vi specifikt diskutera betydelsen av investeringsbehovet i förhållande till priset på guld. Klicka för att förstora Visa 11 Global Gold Investment Demand 2015.My poäng är vad många guldmarknadsaktörer och observatörer tycker är total utbud och efterfrågan bara toppen av isberget. Det här är verkligen en svimlande missuppfattning som skapats av företagen. Klicka för att förstora Den globala guldmarknaden H t Dan Popescu. När man observerar GFMS-saldot i utställning 1 är dess ofullständighet självklart. Nedan ser vi linjens nettobalans som speglar skillnaden mellan total utbud och total efterfrågan. GFMS Om nettobalans är en positiv siffra var det ett överskott på den globala guldmarknaden och om nettobalansen är en negativ siffra, har marknaden varit i underskott. I den verkliga världen är denna siffra irrelevant. Guldförbrukningen och efterfrågan är per definition alltid lika Man kan inte sälja guld utan köpare och man kan inte köpa guld utan säljare Dessutom är guldmarknaden djup och flytande Så hur är det en skillnad mellan total utbud och total efterfrågan i GFMS-saldot Som jag tidigare visat, eftersom GFMS Inkluderar inte institutionell SD som i verkligheten gör skillnaden och långt ifrån. I all sin enkelhet visar nettobalansobjektet att deras data är ofullständiga. Vi har en annan stab på detta Hur kan nettobalansen finns i den verkliga världen till exempel 2009 Enligt GFMS hade guldmarknaden ett överskott på 394 ton 2009 men hur var minare kvar med 394 ton som de inte kunde sälja eller någon supranationell enhet beslutade att suga upp överskottet för att balansera Marknad Naturligtvis är det inte vad som händer Totalt leverans och total efterfrågan är alltid lika, men GFMS registrerar inte alla affärer. För övrigt anser jag att överskott och underskott inte gäller guld Det kan inte finnas något underskott i guld det kommer alltid Vara utbudet Till det rätta priset som är Ibland anser keynesiska ekonomer att det inte finns tillräckligt med guld i världen för att det ska fungera som den globala reservvalutan. Österrikiska ekonomer svarar sedan genom att säga att det alltid kommer att finnas tillräckligt med guld till rätt pris. Jag håller med Österrikare och deras argument validerar också varför det inte finns något underskott i guld. Det finns mer bevis att nettobalansposten som presenteras av GFMS är meningslös. Även enligt GFMS hade marknaden en 394 ton sur lus under 2009 ökade priset med 25 under det året Det ger ingen ekonomisk mening Ett överskott tyder på ett fallande pris, inte tvärtom Tellingly är SD-krafterna som presenteras i GFMS-saldon ofta negativt korrelerade med guldpriset, vilket var fallet 2005, 2006, 2009, 2010 och 2014 uppvisar 1 Slutsatsen är att GFMS SD-saldot inte bara är ofullständigt. De resulterande nettobalansposterna är vilseledande med hänsyn till priset. Nedan följer några diagram som visar denna slutsats. mot slutet av året priset på guld vi kan se korrelationen är ofta negativ Ta en titt nedan Grön netto balans diagram barer visar en positiv korrelation till guldpriset, röda kartor visar en negativ korrelationsnote, vänster axel är inverterad för en Tydligare översikt mellan eventuella underskott överskott och guldpriset Som ni kan se är nästan hälften av nettobalansgrafiken negativt korrelerade med priset på guld. Klicka för att förstora Visa 12 GFMS guldmarknads nettobalans kontra guldpriset Vi kan bryta om nettobalansen 2014 var positivt eller negativt korrelerat med priset jag säger korrelationen var negativ då guldpriset 2014 var oförskämt i amerikanska dollar men var upp i alla andra större valutor, i motsats till GFMSs överskott. Möjligen, trots att nettobalansposten ofta är negativ korrelerad med guldpriset, anges i Guldundersökningen 2016 GFMS på sidan 9. När det gäller nettosaldot , 2015 markerade det tredje året då guldmarknaden var kvar i överskott och det är därför inte förvånande att björnmarknaden fortsatte. Prognosminskningen i den globala minproduktionen och en gradvis återhämtning i efterfrågan kommer att se det fysiska överskottet smalt år 2016, vilket ger Stöd till guldpriset och lägga grunden för bättre prospects. GFMS tycker om att låtsas som eventuellt överskott eller underskott som uppstår genom deras balans är korrelerat med priset, men fakta visar att detta inte är sant Låt oss plotta det fysiska överskottets underskottlinje genom att GFMS uppvisar 1 mot guldpriset Detta resulterar i ännu mer negativa korrelationer. Klicka för att förstora Visa 13 GFMS guldmarknadsunderskott mot guldpris. Denna övning visar att en positiv korrelation mellan antingen ett överskott eller underskott som uppstår till följd av en GFMS-balans och priset på guld är bara en slump. Ingen överraskning när man är medveten om sitt SD Data är ofullständigt. Det var markant att det sista diagrammet också publicerades i Gold Survey 2016, men GFMS valde att inte vända in vänster axel och avslöjar inte vad vi ser är ett överskott eller underskott. Därför är de största överskotten 2006, 2007, 2009 , 2010 verkar korrelera med ett stigande pris, men i verkligheten gjorde de motsatsen Jämför diagrammet nedan med det ovanstående. Klicka för att förstora. Exportera 14 Courtesy GFMS. GFMS publicerar också S D-saldon för silver en monetär metall som kan jämföras med guld För silver är de presenterade korrelationerna av GFMS mellan ett överskott eller underskott i förhållande till priset ännu svagare. Klicka för att förstora Visa 15 GFMS silvermarknads nettobalans mot silverpriset, som beskrivs i Silver Survey 2016. Klicka för att förstora Visa 16 GFMS Silver Market fysiskt överskott underskott jämfört med silver pris, som beskrivs i Silver Survey 2016. Enligt GFMS silver Marknaden är alltid i underskott, men priset går upp och ner Givetvis försummer GFMS att mäta institutionell SD för silver. Enligt min mening när Gold Fields Mineral Services GFMS byggdes för många årtionden sedan gjorde de ett misstag för att anta en SD-balansmetod för varor. med de bästa intentionerna samlar de intelligens och hämtar data från marknaden Men vi måste vara medvetna om att detta inte är den fullständiga bilden De viktigaste uppgifterna avslöjas inte av GFMS. När det gäller vad som driver priset på guld GFMS och jag håller med om det s Bestämd av gulds roll som valuta i världsekonomin När man läser kapitlet PRIS OCH MARKNADSUTSIKTER i guldundersökningen 2016 delar GFMS sina insikter med avseende på guldpriset Is Faktorer som nämns är. Turmoil på de globala aktiemarknaderna. En kinesisk hård landning. Geopolitiska spänningar i Mellanöstern. Centralbanken stimulans QE. Global ekonomisk svaghet. Interestrent policy av centralbanker. Låg risk tillgång säkra tillflyktsort. Så om dessa Faktorer som driver guldpriset, i vilken SD-kategori skulle detta uppstå? Skulle stora investerare köpa och sälja smycken? Eller bullion barer tror jag att den senare Enligt min analys bestäms guldpriset till stor del av institutionell efterfrågan och i mindre utsträckning ETF och detaljhandel Bar coin demand. Let s gör en övning för att se vilka fysiska guld SD trender korrelerar med priset Flertalet av utbudet på GFMS balans består av min produktion och majoriteten av efterfrågan på GFMS balans består av smycken konsumtion Men om vi plottar dessa Volymer jämfört med guldpriset i ett diagram, det finns ingen push-pull-samband. Till exempel när guldpriset ökade från 2002 till 2011 ökade smyckets konsumtion inte heller heller. Min leverans Det motsatta hände, vilket ses i diagrammet nedan Det här beror på att efterfrågan på smycken är priskänslig - när priset går upp ökar smyckets efterfrågan och vice versa Smyckenbehovet driver inte priset på guld. klicka för att förstora Utställ 17 GFMS-efterfrågan på detaljhandel, jämfört med min - och skrotleverans jämfört med guldpriset. Jag har också lagt till detaljhandelns myntbehov Intressant att se är att detaljhandelns myntbehov är å ena sidan en prisdrivare, som går upp och ner i synkronisering med Guldpriset å andra sidan kan det vara priskänsligt med korta spikar när priset på guld sjunker. Den bästa korrelationen mellan fysisk SD i förhållande till guldpriset kan ses i institutionell och ETF SD En av de största guldhandelscentralerna i väst är Storbritannien, hem till London Bullion Market som också vältar den största ETF-namnet GLD Storbritannien har ingen inhemsk minproduktion, inga raffinaderier och nationell efterfrågan på guld är försumbar i det större systemet av saker Därför, genom att mäta nettoflödet Av den brittiska importen minus export kan vi få en känsla av västerländsk institutionell och ETF-efterfrågan och utbud. Till exempel, om Storbritannien är en nettoimportör - importbehovet är större än exportleverans - som signalerar ett netto drag på ovan gr Ojderlag Cirka en tredjedel av Storbritanniens nettoflöde motsvarar ETF-lagerförändringar, de andra två tredjedelarna speglar ren institutionell S D. Klicka för att förstora Visa 18 brittiska nettoflödet jämfört med guldpriset. Klicka för att förstora Visa 19 brittiskt nettoflöde, förändring av GLD-lager, bruttoimport och bruttoexport kontra guldpriset. I diagrammen ovan kan vi observera en anmärkningsvärd solid korrelation mellan Storbritanniens nettoflöde och guldpriset Storbritannien är en nettoimportör på stigande pris och nettoexportörer på fallande pris Den visade korrelationen kan inte vara en slump, men det finns ingen garanti för att det kommer att råda i framtiden. De två diagrammen ovan visar att guldpriset för det mesta bestäms av institutionell utbud och efterfrågan på ovanstående mark Reserver GFMS gömmer effektivt den viktigaste delen av de globala fysiska guldflödena. När jag frågade en analytiker hos en av de ledande företagen varför hans företag inte mäter institutionellt SD berättade han mig öppet, för det är extremt svårt att noggrant uppskatta det Och Det är som jag skrev tidigare kan jag inte noggrant mäta globalt institutionellt SD heller, men mycket ofta ger allmänt tillgänglig information oss en värdefull titt på det och det visar sig vara mer relevant till guldpriset än vad företagen fortsätter stirra på Att inte veta exakt vilka institutionella SD-konton för betyder inte att GFMS borde vara uppmärksam på den. Men företagen fortsätter att försöka hålla illusionen de uppgifter de har sålt i årtionden är komplett för Om de skulle tydligt bekänna att det var ofullständigt skulle framtida affärer bli allvarligt skadade. Vad jag skylder på dessa företag är att de har skapat en meme att guldmarknaden är lika stor som årlig minleverans. Det har orsakat alla slags missuppfattningar. Ofta läste jag analyser baserad på en jämförelse mellan kvantitativ efterfrågan och minproduktion. Sådana analyser kommer sannolikt att hoppa felaktiga slutsatser. Förenklade översikt guldflöden 2015. Klicka för att förstora. Uppsägning Jag har inga positioner i några angivna lager och inga planer på att initiera några positioner inom nästa 72 timmar. Jag skrev själv denna artikel och uttrycker mina egna åsikter. Jag får inte ersättning för det. Jag har inget affärsförhållande med något företag vars aktie är män I den här artikeln. Läs hela artikeln. Binär Alternativ Fast Odds Finansiella Bets Bit. 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The present low supply of gold has resulted to bullish projections of this precious metal in the world market If you look at the charts, you will come to realize that the total production of gold now compared to four decades ago, has dropped considerably by almost 15 per cent South Africa, which has been the top producer of gold has topped its production peak and is now 30 per cent short of its output It is projected that with the sluggish production, gold will have a field day playing bull in the market for a long time. The Present Gold Supply Situation. 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When I recently asked my wife what she wanted for our upcoming wedding anniversary, this was my first mistake Then after she gave me her answer and I said I d consider it, this was my second Honey, the gold on my wedding band is wearing a little and I ve always wanted to remount my diamonds in platinum Platinum is so pretty and it would be a nice contrast to all my other jewelry And besides, after all these years of putting up with you, surely it can t be too much to ask. Well for putting up with me she deserves an armored truck filled to the top with platinum bars, but i n reality her simple request was quite precious Platinum embodies the quintessential meaning of a precious metal As one of the rarest metals in the earth s crust, its brilliance is reflected through its high price on the open market. Measured by weight, platinum has been generally worth about twice as much as gold And because of its rarity and beauty, it has taken the jewelry market by storm in the last century Today platinum bullion coins are even recognized as a form of currency in many countries ramping up investment demand It is just magical to hold in your hand a one-ounce pure platinum bullion coin How can a goofy ring possibly provide the same feeling. Platinum has a working side to it as well serving many different industrial applications And in this growing global economy, platinum is not exempt from the economic woes that most commodities are currently experiencing The balance of commerce is off kilter even for platinum as supply has not been able to keep up with fast-growing d emand Because of this imbalance, the price of platinum has substantially risen thus far in this still-young secular bull market in commodities. As you can see in the chart above, platinum has risen right along side its more popular precious metal sibling, gold Gold and platinum have carved beautiful uptrends as precious metals took the lead in this great commodities bull rewarding prudent investors and speculators with excellent gains to date. Since the beginning of this bull market, platinum has gained over 200 and has amazingly shattered the four-digit level in price It is incredible that one ounce of this very precious metal can be worth more than one-thousand U S dollars And your wallet sure feels it when you outfit hand d cor for the one you love. As mentioned previously, global demand for platinum has soared in recent years As you can see in the next chart, demand has steadily increased in each of the last ten years Since 1996 there has been an incredible 35 increase in global deman d for what the 16th century Spaniards dubbed platina , meaning little silver If the Spaniards knew platinum s eventual value, they surely would not have discarded it as an unwanted impurity in silver. According to the supply and demand data obtained from platinum group metals PGM think tank Johnson Matthey there has been a running seven-year supply deficit in platinum And analysts expect this deficit to continue. Platinum demand has continued its global rise driven mainly by the autocatalyst sector The growth of light-duty diesel vehicles in Europe has accounted for a large portion of this demand in recent years And as demand for diesel vehicles continues to rise into the future mixed with tighter emissions standards being implemented globally, autocatalyst platinum demand should increase for many years to come. In 2005 the autocatalyst sector accounted for nearly half of the global demand for platinum, using 50 more of the metal than just four years earlier As newer model vehicles are ma nufactured to meet the latest emissions standards, increased catalytic converter production is ultimately what has been running up PGM demand. Platinum has been the metal of choice in this sector due to its amazing catalytic properties even though all PGMs ruthenium, rhodium, palladium, osmium, iridium and platinum embody this characteristic with differing levels of efficiency In a nutshell, PGMs serve as the catalyst inside a converter where the chemical reactions take place in turn treating vehicle exhaust emissions. A growing global environmental push to reduce automobile emissions of particulate matter, nitrogen oxide and hydrocarbons has led to increasingly stringent EPA and Euro IV regulations Vehicle manufacturers have to grin and bear it, but if you are a commodities investor and or speculator this can be viewed in a different manner. So with my commodities goggles on, I read this as catalytic converters should become mandatory in a growing number of vehicles globally in the futur e And the more catalytic converters produced, the more PGMs will be required, specifically platinum The more PGMs required, the more of a pinch PGM producers will face in bringing supply to market And until the current economic imbalance reverses and there is a surplus of platinum, the prices will likely continue to rise So going long platinum should be a no-brainer in this secular bull, right. Well because of platinum s rapid price increase, there has been chatter in the automobile industry that an alternative needs to be found in order to cut costs But since there currently isn t a good alternative to PGM catalysts in catalytic converters, other PGMs are being looked at as substitutes Since the metals within the PGM class can indeed substitute for each another, with varying degrees of efficiency loss, there has been a shift to a higher ratio of palladium used as the catalyst in gasoline-engine vehicles. Palladium, the second most popular and most abundant PGM, is currently about a quar ter the price of platinum Because it is so much cheaper and gasoline-engine catalytic converters don t lose their mojo with a higher ratio of palladium as the catalyst, it may be viable for manufacturers to look this direction Some manufacturers are indeed making the move, but because of palladium s history of wild volatility, many of them have not jumped onboard just yet. Interestingly, palladium is one of the few metals that is currently running at a supply surplus For the fifth year in a row supply has been greater than demand According to Johnson Matthey, nearly 8 4 million ounces of palladium was produced in 2005 while only about 7 million ounces was in demand. One of the reasons for this palladium surplus is actually its decline in use in the autocatalyst sector over the years As with platinum, this sector is also palladium s largest, but growth was flat last year How can this be possible if palladium is starting to selectively replace platinum as an autocatalyst Well one reason is technological advances which have allowed for increased thrifting of palladium in turn directly reducing its average load levels in catalytic converters. Palladium is indeed being used in more and more catalytic converters, but mostly in gasoline-engine vehicles With the increase in diesel vehicle production subsequently slowing the growth of gasoline vehicles, along with increased recycling and thrifting, palladium s perceived growth in the autocatalyst sector appears stagnant. Where palladium demand has really picked up steam in the last few years though is in the jewelry sector In just the last three years there has been a 450 increase in palladium jewelry demand Its growingly popular stand-alone jewelry class mixed with its use as an alloy with gold to create increasingly popular white gold has fueled this increase. Even with its growth in jewelry, you can see in the chart that palladium is trading below its early 2002 levels where most other commodities had taken off from Overall a loser in this secular commodities bull, its bubble at the turn of the century spelled doom for palladium s current fortunes. Since 2001 palladium has tanked from its high of 1,100 per ounce down to the levels we see today hovering around 300 Though many people place the blame on Ford Motors, the bubble spike you see in the chart above was really the result of two factors Ford indeed played a large role, as revealed in its 1 billion charge in palladium losses a couple years ago The reason for this was Ford irrationally stockpiled vast quantities of palladium in 2000 afraid that Russia would halt its supply This in turn tightened supply and really ended up biting Ford along with the entire palladium market. But the other factor was the little known Coltan Crisis At the peak of the tech bubble, palladium was deemed the replacement for the then short-supplied tantalum, used in various electronics as well as cell phones This crisis ended up being blown way out of proportion, but the two combi ned factors prompted speculators to emphatically bid up palladium prices leading to its sharp crash in 2001 that I believe this metal has still not yet fully recovered from. As implied, Ford s fears ended up proving wrong as Russia is a prime culprit for palladium over-supply But its vast palladium stocks will significantly decrease over the next couple of years and demand for palladium should continue to rise Industry experts forecast demand will eventually catch up with supply and that perhaps a supply deficit might rear its head as early as next year Palladium should be an interesting metal for investors and speculators to keep an eye on in the years to come. Even with the palladium autocatalyst prospect looming in gasoline-engine vehicles, diesel vehicle growth, focused mainly in Europe right now, might perhaps be able to continue to hoist platinum demand on its own As mentioned before, European diesel vehicle growth has been the main factor in the growing platinum demand The reason for this is up until recently, platinum had been the only metal used in the compression-ignition engine catalytic converter. Diesel emission control is tightly regulated in first-world countries, and in order to meet the high-temperature permanence in diesel engines, only the platinum catalyst possessed the acceptable physical and atomic properties And with the increasing need to focus on reducing nitrogen oxide and particulates soot from diesel engines, platinum, which is the most active catalyst, has been the only option in meeting environmental regulations. Recent technological breakthroughs have enabled palladium, which actually has the lowest melting point of the PGMs, to substitute for a minor portion of the platinum within diesel catalysts This is not enough to significantly curb platinum demand, but every penny saved in auto manufacturing is meaningful, so it is being welcomed by manufacturers with open arms. And with diesel vehicles proving to be more energy efficient than conven tional gasoline-engine vehicles, the case for platinum really heats up Europeans pay about three times as much for gasoline as Americans do, so the incentive is there to streamline energy efficiency Nearly half the passenger vehicles sold in Europe now have diesel engines, and this is expected to grow. Gasoline costs in America are not high enough yet for consumers to take action, but when prices do rise enough, will diesel make a comeback in the U S I m not advocating diesel over gas, but many of the problems with diesel vehicles in the past have been overcome, so you never know Either way, the autocatalyst sector will continue to dominate PGM and specifically platinum demand. And whether diesel or gas, thankfully it is quite difficult for the average person to access catalytic converters in vehicles Most people don t normally consider that when they park their newer model cars on the street, they are exposing one of the rarest and most expensive metals on earth At today s prices, a sop histicated thief could make a fortune if he figured out how to quickly and easily extract platinum or even palladium from catalytic converters. With copper prices on the rise, thieves today are raiding construction sites and abandoned warehouses to steal wiring and tubing to sell for some gain Site foremen are now forced to lock up their copper overnight to prevent this If a thief is willing to take this risk for something worth less than one ten-thousandth of one percent the value of platinum measured by the ounce, then you never know I know this is pretty much impossible, but nuttier things have happened Hmmm, you are probably thinking by now that my wife actually deserves two armored trucks full of platinum bars huh. Back to platinum fundamentals, the next major sector that consumes platinum is the jewelry sector, which commands about one-third of platinum s annual demand But surprisingly this sector has seen a sizeable decrease in demand over the years There has been an incredible 30 decrease in jewelry demand for platinum in just the last four years. With the high price of platinum these days, as I well know, jewelry consumption has been down from a mere affordability standpoint Instead of placing new orders, jewelers have been depleting stock and recycling consumer-sold metal And surprisingly another big reason for jewelry decline last year was Chinese lore Last year was the Year of the Rooster, in which it is traditionally a bad year to get married 2006 is the Year of the Dog, and weddings are expected to skyrocket in China significantly increasing jewelry demand, with platinum not being an exception. And with platinum s high price, white gold and palladium have seen a surge in the jewelry sector as a platinum substitute Though there are core differences, to the naked eye they look virtually the same as platinum, and are much cheaper Upscale jewelry buyers are not expected to sway from platinum though regardless of the price, and neither will my wife. The only oth er industries that have a significant industrial use for platinum is glass and electrical The glass industry is seeing fast-growing platinum demand led by its use in LCD and various flat panel displays And demand is quickly growing in the electrical industry as the development of fuel cells continues to rise with platinum playing an important role. Geopolitically 90 of today s mined platinum supply comes from two countries And South Africa alone produces the lion s share of this amount as it produced over 5 million ounces of platinum last year South Africa is expected to continue to be a major PGM supplier in the years to come, but with the strength of the rand against the dollar and the growing risk its Marxist government poses, it is not the safest place in the world for it to be coming from Russia is the other major platinum producer as the giant Russian nickel and copper mines are finally releasing this valuable byproduct to the open market. Platinum is a fun metal to analyze, but th e underlying reason we do this is to identify opportunities to make money on it Fundamentally platinum is poised to continue its rise in this secular bull market, but how do we trade it today Gold and gold stocks have captured much of our attention on the precious metals front, so how does platinum compare. First, gold is my absolute favorite precious metal Its characteristics are unequalled compared to all other metals and it serves as the best overall store of value especially in this day and age as a hedge against weakening fiat currencies Even though platinum is more of a precious metal on the value front, due to the sheer fact that the world s supply of platinum, annually and historically, is insignificant to hold as a global currency, it will never replace gold as the ultimate precious metal. Gold can be very useful in trading platinum though Gold and platinum have had an amazing correlation in this bull market of 0 958 with an r-square of 92 So 92 of the daily behavior of platinum can be statistically explained or predicted by gold, not bad We use many technical trading tools for timing our tactical and strategic gold trades, so these should be useful for platinum as well. One of the tools we use is Relativity Relativity is a trading theory my partner Adam Hamilton developed years ago in order to help us better understand and time the flows and ebbs of secular bull markets The simple mathematics of Relativity are measured by dividing the price of in this example platinum by its 200-day moving average Charting the resulting data provides a relative trading range for platinum as a constant multiple of its 200dma over time. The chart above provides a probabilistic trading band showing when odds favor a surge or correction at any given time As you can see, the horizontal relative support and resistance lines have provided us with fairly good and reliable entry and exit points for platinum Since 2002, there have been three notable uplegs in platinum And in each of the se uplegs, relative buy signals allowed us excellent entry points and relative sell signals allowed us to capture a large portion of the gains before the following correction. After this latest upleg that screeched to a halt in May, platinum has been correcting sharply with all the metals as the wild euphoria was finally unmasked This correction was very necessary though in order to bleed off greed and balance sentiment so new momentum can be built for the next upleg in this secular bull. So as we wait for our next opportunity to deploy near-term speculative capital into not only gold, silver and base metals, we need to identify our targets for the PGMs as well Speculators have been able to ride platinum for large part in the futures markets But thankfully stock investors and speculators have stellar opportunities as well in the companies that explore, develop and produce PGMs as they are typically well-leveraged to ride platinum s gains. Platinum has a relatively small market compared to most other metals As an example, the largest gold producer in the world single-handedly produced more ounces of gold last year than the entire global mined supply of platinum measured by weight Opportunities still exist though and even though platinum stocks are not as abundant as say gold stocks, there are several good ones out there. And so far history has revealed the time to buy PGM and platinum stocks is when the underlying metal is trading near its 200dma as indicated by Relativity When platinum is at its relative support, probabilities favor an upleg in continuation of its upward secular trend In the subscriber section of our website we update a large rPlatinum chart weekly among the dozens of charts we use to analyze the markets and time our trades. As we watch platinum s technical signals as well as monitor the behavior of its shiny yellow brother, gold, we are researching the best of the best metals companies that are likely to thrive in the upleg to come On the Watch List in our monthly Zeal Intelligence newsletter, we list several PGM candidate stocks among the many we are tracking in addition to over 50 other commodities stocks that we favor as buying opportunities present themselves. If you wish to get cutting-edge commodities market analysis and stock picks as well as access to our acclaimed charts, please subscribe to our newsletter today New email subscriptions will receive a complimentary copy of the current issue. In addition to platinum, we will also continue to keep an eye on palladium as this bull gallops forward As demand increases and warehoused stock decreases, a potential imbalance may be approaching in the near future Palladium may indeed join the commodities bull run before it is over. A late bloomer is perfectly acceptable in any normal secular bull market as not all commodities are required to join the party at the same time Base metals lagged precious metals and energy by a couple of years in their bull run and perhaps palladium will find some momentum soon to come. The bottom line is as we trade the commodities bull, our strategy is to buy the stocks of the companies best leveraged to take advantage of an appreciation of their underlying commodity The companies that explore, develop, produce and service commodities have been some of the best performers in recent years. At Zeal we have had great success trading the metals and energy stocks PGMs will offer similar opportunities And though this market is small, fundamentals tell us its bull is likely far from over. Tag Archives gold demand. Withdrawals from the vaults of the Shanghai Gold Exchange, which can be used as a proxy for Chinese wholesale gold demand reached 1,406 tonnes in the first three quarters of 2016 Supply that went through the central bourse consisted of at least 905 tonnes imported gold, roughly 335 tonnes of domestic mine output, and 166 tonnes in scrap supply and other flows recycled through the exchange. Core Supply Demand Data Chinese Gold Market Q1-Q3 2 016.Chinese gold demand is still going strong this year, albeit less than in 2015 The most likely reason for somewhat lower demand has been the strength in the price of gold in the first three quarters of this year, to which the Chinese reacted by subduing purchases From 1 January until 30 September 2016, the gold price went up 24 in US dollars per troy ounce, from 1,061 5 to 1,318 1 measured in renminbi the price went up 28 over the same period. Now I have proven the gold on Chinese commercial bank balance sheets has little to do with physical gold ownership of these banks, but mainly reflects back-to back leases and swaps we can be positive that data on withdrawals from the vaults of the Shanghai Gold Exchange SGE roughly equals Chinese wholesale demand For now that is, as future developments can always alter our metrics. Below is a chart showing withdrawals from the vaults of the SGE and the price of gold in yuan per gram The most significant trends of recent years are still in effect in the short term, when the gold price is falling Chinese demand increases 2013 and 2015 , when the gold price is rising Chinese demand declines 2016 This trend is supported by SGE premiums that have an inverse correlation with the price of gold, when the price of gold declines, SGE premiums escalate and vice versa I will show charts below Furthermore, in the long term we can observe consistent growth in Chinese gold demand due to the opening up and development of the domestic market. Exhibit 1 SGE withdrawals versus the gold price in yuan per gram. SGE withdrawals in the first three quarters of 2016 accounted for 1,406 tonnes still impressive down 29 from 1,986 tonnes in 2015, which was a record year Annualized SGE withdrawals are set to hit 1,877 tonnes in 2016.Notable, known net import by China is relatively strong compared to SGE withdrawals in 2016 Total net import in the first three quarters of this year has aggregated to 905 tonnes annualized 1,206 tonnes or 64 of SGE withdrawals , versus an import withdrawals ratio of 53 in 2015 As mine supply to the SGE is fairly constant, recycled gold through the SGE must be lower this year than last year As a rule of thumb, we use the equation. For Q1-Q3 2016 that gives.1,406 tonnes 335 tonnes 905 tonnes 166 tonnes. The largest net exporter to China is still Hong Kong, having transhipped 608 tonnes to the mainland from January until September 2016, up 5 compared to 2015 The volume Hong Kong exports to the mainland has been quite constant since 2014, while in 2013 China s special administrative region was a substantial larger supplier. There have been rumors that Hong Kong s export to China is overstated in the official data by the Hong Kong Census Statistics Department, caused by fake exports In the chart below you can see that the share of exports relative to re-exports from Hong Kong to China this year has increased from previous years Potentially this signals fake exports, as it s easier to over invoice an export than re-export though I haven t found hard evidence for this scheme When I do I will report accordingly. Exhibit 2 Hong Kong cross-border gold trade with China mainland Any potential export scheme can have nothing to do with round-tripping as Hong Kong s gross import from China is very low Exhibit 3 Monthly Hong Kong cross-border gold trade with China mainland The exports re-exports ratio has fallen since July. The second largest exporter to China is Switzerland, having supplied a net 229 tonnes so far this year, which is 22 more than last year Clearly, direct shipments from Switzerland to China have repla ced shipments via Hong Kong. Direct net exports by the UK to China mainland have collapsed by 92 this year compared to 2015, from 210 tonnes to a mere 18 tonnes The reason being, the UK has been the largest net importer globally this year, which is related to the strength in the gold price early this year UK net gold trade is a proxy for Western institutional supply and demand. Exhibit 4 Monthly UK net gold flow and GLD inventory change versus the gold price in US dollars per troy ounce Note, the strong correlation between the price and UK net flows. Australia s direct export to China is down this year as well in the first eight months, data for September has not yet been released I ve computed the data as described in my post Australia Customs Department Confirms BullionStar s Analysis On Gold Export To China Following this method, the land of down under has sent 50 tonnes of gold directly to China during the first eight months of this year, down 23 from 65 tonnes in 2015.Despite press r eleases suggesting Russian gold enterprises are strengthening ties with the SGE, I have identified only one shipment of 30 Kg by the Russian Federation directly to China in 2016 In 2013 the Russians directly net exported 50 Kg to China. Exhibit 5 Gold export Russia to China. Data on gold export from South Africa to China is not publicly available. Exhibit 6 Chinese monthly gold supply and demand data Exhibit 7 Chinese gold supply and demand data for Q1-Q3 2013, 2014, 2015 and 2016.In exhibit 7 we can see that, although the level of SGE withdrawals in 2016 is lower than in 2013, 2014 and 2015, net imports are higher than in 2014 It s very difficult to know the exact explanation for relative high imports this year Though, in my opinion, it s connected to increased Chinese ETF demand, which grew by 34 tonnes and is all required to be stored in SGE vaults and less gold being recycled through the SGE. Since 2014, when the Shanghai International Gold Exchange SGEI was erected there is a possibil ity SGE withdrawals are inflated by withdrawals from vaults in the Shanghai Free Trade Zone gold that is allowed to be exported abroad the free trade zone is not part of the domestic market But as far as I know any activity on the SGEI lacks foreign enterprises that buy gold to withdraw and export A couple of months ago a source at a large Chinese bank told me the SGEI is mainly used by Chinese banks to import gold into Chinese domestic market In addition, I haven t bumped into any large importers from China Occasionally India imports a few hundred Kg, but that s it. The emblematic difference between Chinese gold demand as disclosed by GFMS and SGE withdrawals displayed in exhibit 7 is due to GFMS incomplete metrics For decades this consultancy firm has been denying the existence of institutional supply and demand in above ground gold, which is far more important to price formation than retail sales and mine supply the predominant flows published by GFMS The essence of this swindle can be read in my blog post The Great Physical Gold Supply Demand Illusion I also have a few more blog posts in the pipeline that discuss GFMS most recent gold supply and demand data. SGE Premiums November Highest Since 2013.I expect November to be a very strong month for SGE withdrawals Mentioned in the introduction segment of this post, there is a trend in Chinese wholesale gold demand in relation to the gold price Whenever, the gold price is climbing, Chinese demand is subdued, accompanied by low SGE premiums when the gold price is decreasing, SGE withdrawals and premiums in China shoot up The relationship between the gold price and SGE withdrawals can be viewed in exhibit 1 Below in exhibit 8 9, readers can see the relationship between SGE end of day prices and premiums. Exhibit 8 SGE end of day prices and premiums Exhibit 9 SGE end of day prices and premiums, including moving averages which make the inverse correlation more visible. Note, the gold price on the SGE and the premium have an inverse correlation. I already mentioned that SGE withdrawals in the first nine months of 2016 have been subdued due to a rally in the gold price However, high premiums at the SGE in November forecast elevated withdrawals for the month Since Trump got elected on November 9, and price of gold started tumbling, SGE premiums have broken a three-year record This signals strong demand. In the next chart from we can see the premium on the SGE s most traded physical contract Au99 99 has risen since November 9 and reached 3 by 24 November Levels not seen since 2013 exhibit 8.Exhibit 10 Intraday SGE premium Au99 99 versus XAUUSD. Although the relationship between the gold price and SGE premiums has been in place for years, Reuters reports the high premiums in November are caused by worries on import restrictions From Reuters. Gold premiums in top consumer China jumped to the highest in nearly three years this week on worries over a supply shortage that traders said were due to Beijing s efforts to restrict import licenses. While we don t have the exact numbers, we hear that they Chinese government have limited the number of importers, said Dick Poon, general manager at Heraeus Precious Metals in Hong Kong. To me this statement doesn t make sense At this moment that are 15 banks approved by the PBOC to import gold Limiting the number of importers would cause less importers to import more gold in order to balance the domestic market supply gold from abroad when necessary In the Measures for the Import and Export of Gold and Gold Products drafted by the PBOC in March 2015 it states. An applicant for the import of gold shall have corporate status, it is a financial institution member or a market maker on a gold exchange SGE approved by the State Council. The main market players with the qualifications for the import of gold shall assume the liability of balancing the supply and demand of material objects on the domestic gold market Gold to be imported shall be registered at a spot gold exchange SGE approved by the State Council where the first trade shall be completed. The Chinese government could lower imports by distributing less import licences to approved banks As, every approved bank still needs to submit for a license for every gold import batch Logically, lowering imports would be done by the PBOC through handing out less licences. There shall be one Import License of the People s Bank of China for Gold Products for each batch and the License shall be used within 40 work days since the issuing date. If the PBOC wanted to lower imports, it would simply hand out less licences No need to limit the number of importers. Either way, I expect SGE withdrawals to be strong for November. Gold supply and demand data published by all primary con sultancy firms is incomplete and misleading The data falsely presents gold to be more of a commodity than a currency, having caused deep misconceptions with respect to the metal s trading characteristics and price formation. Numerous consultancy firms around the world, for example Thomson Reuters GFMS, Metals Focus, the World Gold Council and CPM Group, provide physical gold supply and demand statistics, accompanied by an analysis of these statistics in relation to the price of gold As part of their analysis the firms present supply and demand balances that show how much gold is sold and bought globally, subdivided in several categories It s widely assumed these balances cover total physical supply and demand, which is incorrect as the most important category is excluded The firms though, prefer not to share the subtle truth or their business models would be severely damaged. The supply and demand balances by the firms portray gold to be more of a commodity than a currency, as the gist o f the balances reflect how much metal is produced versus consumed put differently, the firms mainly focus on how much gold is mined versus how much is sold in newly fabricated products However, in reality gold is everlasting and cannot be consumed used up , all that has ever been mined is still above ground carefully preserved in the form of bars, coins, jewelry, artifacts and industrial products Partly because of this property the free market has chosen gold to be money thousands of years ago, and as money the majority of gold trade is conducted in above ground reserves Indisputably, total gold supply and demand is far in excess of mine production and retail demand. As most individual investors, fund managers, journalists, academics and precious metals analysts consider the balances by the firms to be complete, the global misconception regarding gold supply and demand is one of epic proportions Physical gold is a profound anchor in our global financial system and thus it s of utmost im portance we understand the fine details of its trading characteristics. Supply Demand Metrics By The Firms. The firms can argue that the difference between what they present as supply and demand S D , as opposed to what I deem to be a more unadulterated approach of S D is due to contrasting metrics Accordingly, we ll discuss their metrics to reveal their infirmity In a nutshell, the firms only count the physical gold S D flows that are easy to measure, while leaving out the most important part institutional supply and demand. Although the firms all have slightly different methodologies to measure S D, from comparisons the numbers appear to be quite similar For our further investigation we ll spotlight the metrics and models by GFMS The reason being, GFMS has been the only firm that was willing to share a full description of their methodology for publication to be viewed here Metals Focus MF provided a partial methodology, the World Gold Council and CPM Group declined to comment. Let s have a look at GFMS its S D categories On the supply side is included. Mine supply newly mined gold. Scrap supply gold sourced from old fabricated products. On the demand side is include. Jewelry demand gold content used in newly manufactured jewelry products bought locally at retail level, adjusted by jewelry exported and imported. Industrial demand the volume of gold used in industrial applications, for example bonding wire, products used in semiconductors electronics and dental alloys. Retail bar investment the net volume of bars that are purchased by individual investors through retail channels. Coin investment a combination of published data from mints and also a proprietary survey conducted by GFMS detailing where coins are sold. The above four demand categories summed up are often referred to as consumer demand by the firms. Furthermore GFMS includes hedging change in physical market impact of mining companies gold loans, forwards, and options positions official sector total central bank sel ling or buying. ETF inventory build change in ETF inventory. Exchange inventory build change in exchange inventory. The last four categories can be either supply or demand In example, when central banks the official sector in total are net sellers this will be listed as a negative demand figure, as is shown in the S D balance by GFMS below from 2006 until 2009, when central banks in total are net buyers this will be listed as a positive demand figure, as is shown in the balance from 2010 until 2015 For a clear overview of the GFMS S D balance please have a look at all line items below. Exhibit 1 Courtesy GFMS Global gold S D balance as disclosed in the Gold Survey 2016.According to GFMS Supply consists of Mine production Scrap and Net Hedging In turn, Demand consists of Jewelry , Industrial Fabrication , Retail Investment and Net Official Sector After balancing Supply and Demand this results in a Physical Surplus Deficit Then, ETF Inventory Build and Exchange Inventory Build are added subt racted from the Physical Surplus Deficit to come to a Net Balance. GFMS likes to pretend their balance is complete and occasionally articulates any surplus or deficit arising from it is positively correlated to the price of gold, which is anything but true, as I will demonstrate step by step. The Firms Exclude Majority Gold Supply Demand. Most important what s excluded from the balance is what we ll refer to as institutional supply and demand, which can be defined as trade in bullion among high net worth individuals and institutions Usually the bullion in question comes in 400-ounce 12 5 Kg London Good Delivery GD bars having a fineness of no less than 995, or smaller 1 Kg bars having a fineness of no less than 9999 In addition, bullion bars can weigh 100-ounce or 3 Kg, among other less popular sizes, generally having a fineness of no less than 995 Bullion can be traded without changing in weight or fineness, but it can be refined and or recast for transactions as well, in example from GD bars into 1 Kg bars In some cases institutional supply and demand involves cross-border trade, when bullion is sold in country A to a buyer in country B, in other cases the bullion changes ownership without moving across borders. Provided are two exemplifications of institutional S D. An institutional investor orders 400 Kg of gold in its allocated account at a bullion bank in Switzerland which would be purchased in the Swiss wholesale market most likely in GD bars This type of S D will not be recorded by GFMS. A Chinese institutional investor buys 100 Kg of gold directly at the Shanghai Gold Exchange SGE , the Chinese wholesale market , in 1 Kg 9999 bars and withdraws the metal from the vaults Neither this transaction will be registered by GFMS or any other firm. These examples show the S D balances by GFMS are incomplete. For illustrational purposes, below is a chart based on all S D numbers by GFMS from 2013, supplemented by my conservative estimate of institutional S D Including instit utional transactions total S D in 2013 must have reached well over 6,600 tonnes. Exhibit 2 Global gold S D 2013 by GFMS, including conservative estimate institutional S D. GFMS Covers The Tracks With Help From The LBMA. Although GFMS intermittently admits their number are incomplete they have to , at the same time they ve been battling for years to eclipse apparent institutional S D for its audience Dauntless tactics were needed when in 2013 institutional demand in China reached roughly 1,000 tonnes and over 500 tonnes in Hong Kong Institutional demand in the East was predominantly sourced through GD bars from the London Bullion Market, which were refined into 1 Kg 9999 bars that are more popular in Asia For the cover up GFMS went to great lengths to refute the volumes of gold withdrawn from SGE vaults, and accordingly have the London Bullion Market Association LBMA adjust statistics on total refined gold by its member refineries Remarkably, the LBMA cooperated Allow me to share my analys is in detail. In 2013 something unusual happened in the global gold market as Chinese institutional demand exploded for the first time in history Hundreds of tonnes of institutional supply from London in the form of GD bars were mainly shipped to Switzerland to be refined in 1 Kg 9999 bars, subsequently to be exported via Hong Kong to meet institutional demand in China From customs data by the UK, Switzerland and Hong Kong the institutional S D trail was clearly visible From 2013 until 2015 there was even a strong correlation between the UK s net gold export and SGE withdrawals Demonstrated in the chart below. Exhibit 3 Correlation between UK net gold export and SGE withdrawals. Because of the mechanics of the gold market in China Chinese institutional demand roughly equals the difference between the amount of gold withdrawn from SGE designated vaults exhibit 4, red bars and Chinese consumer demand exhibit 4, purple bars In the exhibit 4 below you can see this difference that brought GFMS in a quandary, especially since 2013 For more information on the workings of the Chinese gold market and the size of Chinese institutional demand please refer to my post Spectacular Chinese Gold Demand Fully Denied By GFMS And Mainstream Media. Exhibit 4 Chinese wholesale demand SGE withdrawals , versus GFMS consumer demand versus apparent supply. Stunningly, since 2013 GFMS has tried to convince its readers through numerous arguments why SGE withdrawals crossed 2,000 tonnes for three years in a row, while Chinese consumer demand reached roughly half of this Yet the arguments have failed miserably to explain the difference they rationalize only a fraction, read this post for more information. And GFMS did more to eclipse apparent institutional S D They colluded with the LBMA. To be clear, I cannot exactly measure global institutional S D However, let me make an estimate of apparent institutional demand for 2013 Notable, in 2013 a flood of gold crossed the globe from West to East Chinese i nstitutional demand accounted for 914 tonnes and Hong Kong net imported 579 tonnes the latter we ll use as a proxy for additional Asian institutional demand, as Hong Kong is the predominant gold trading hub in the region. In total apparent institutional demand in 2013 accounted for 914 579 1,493 tonnes If we add all other demand categories by GFMS shown in exhibit 1, total demand in 2013 was at least 6,619 tonnes Be aware, this excludes non-apparent institutional demand. Exhibit 5 Global gold demand 2013 by GFMS, including apparent institutional demand. Because nearly all wholesale gold demand in Hong Kong and China is for 1 Kg 9999 bars, the global refining industry was working overtime in 2013, mainly to refine institutional and ETF supply in GD bars coming from London In December 2013 I interviewed Alex Stanczyk of the Physical Gold Fund who just before had spoken to the head of a Swiss refinery At the time Stanczyk told me brackets added by me. They put on three shifts, they re working 24 hours a day and originally he the head of the refinery thought that would wind down at some point Well, they ve been doing it all year 2013 Every time he thinks it s going to slow down, he gets more orders, more orders, more orders They have expanded the plant to where it almost doubles their capacity 70 of their kilobar fabrication is going to China, at apace of 10 tonnes a week That s from one refinery, now remember there are 4 of these big ones refineries in Switzerland. As a consequence, statistics on total refined gold production in 2013 by LBMA accredited gold refiners who are on the Good Delivery List , which the four large refineries in Switzerland are part off, capture the immense flows of institutional S D next to annual mine output and scrap refining On May 1, 2015, the LBMA disclosed total refined gold production by its members at 6,601 tonnes for 2013 in a document titled A guide to The London Bullion Market Association It s no coincidence this number is very close to m y estimate on total demand 6,619 tonnes , as apparent institutional demand in Asia was all refined from GD into 1 Kg bars. Here s exhibit 2 from another angle. Exhibit 6 Global gold S D by GFMS, including apparent institutional S D, versus total refined gold production 2013.In the table below we can see the LBMA refining statistics for 2013 at 6,601 tonnes. Exhibit 7 Courtesy LBMA Screenshot from A guide to The London Bullion Market Association captured by Ronan Manly in May 2015.After this publication GFMS was trapped these refining statistics revealed a significant share of the institutional S D flows they had been trying to conceal What happened next I assume was that GFMS kindly asked the LBMA to adjust downward their refining statistics First and painstakingly exposed by my colleague Ronan Manly in multiple in-depth posts , the LBMA kneeled and altered its refining statistics to keep the charade in the gold market going. On August 5, 2015, the LBMA had edited the aforementioned docume nt, now showing 4,600 tonnes in total refined gold production Click here to view the original LBMA document from the BullionStar server, and here to view the altered version from the BullionStar server Have a look. Exhibit 8 Courtesy LBMA Altered document on refining statistics by the LBMA August 2015.In the altered version it says. Total refined gold production by the refiners on the List was estimated to be 4,600 tonnes in 2013, owing to recycling of scrap material, above world mine production of 3,061 tonnes source Thomson Reuters GFMS. A few important notes. In the altered version the LBMA mentions an estimate for total refined gold production , while it doesn t need to make an estimate as all LBMA accredited gold refiners who are on the Good Delivery List are required to provide exact data to its parent body The exact data was disclosed in the first version of A guide to The London Bullion Market Association , and it stated, total refined gold production by the refiners on the List wa s 6,601 tonnes. In the altered version the LBMA states the refining statistics were sourced from Thomson Reuters GFMS, but the LBMA doesn t need GFMS for these statistics The fact they mention GFMS, though, suggests a coordinated cover up of institutional S D Not only the firms, also the LBMA publishes incomplete and misleading data. The altered version stated refining production totaled 4,600 tonnes, which is a round number and obviously quickly made up A few weeks after the numbers were adjusted, the LBMA adjusted the numbers again, this time into 4,579 tonnes click here to view from the BullionStar server Clearly, on several occasions there has been consultation with the LBMA to get the statistics in line with GFMS. In the original document the LBMA states, Total refined gold production by the refiners on the List was 6,601 tonnes in 2013, more than double world mine production of 3,061 tonnes , while in the altered version they state, Total refined gold production by the refiners on t he List was estimated to be 4,600 tonnes in 2013, owing to recycling of scrap material, above world mine production of 3,061 tonnes Notable, GFMS prefers to have total supply focused around mine and scrap production, instead of including institutional supply. The original refining statistics 6,601 tonnes are still disclosed in the LBMA magazine The Alchemist 78 on page 24 , to be viewed from the LBMA server here. The fine details about how often and when the LBMA changed its refining statistics can be read in Ronan Manly s outstanding post Moving the LBMA s shifting stance on gold refinery production statistics. And so nothing is spared in trying to uphold the illusion of the GFMS S D balance to be complete In another example GFMS excluded gold purchases by the central bank of China from its S D balance In June 2015 the People s Bank Of China PBOC increased its official gold reserves by 604 tonnes, from 1,054 tonnes to 1,658 tonnes During that quarter Q2 2015 all other central banks world wide were net buyers at 45 tonnes Thus, in total the Official Sector was a net buyer at 649 tonnes Now, let s have a look at GFMS S D balance for Q2 2015.Exhibit 9 Courtesy GFMS Global gold S D balance as disclosed in the Gold Survey 2015 Q2 Official Sector purchases are disclosed ay 45 tonnes GFMS decided not to include the 604 tonnes increment by the PBOC simply because it didn t fit their balance model A 604 tonnes increment in would have set the net balance at -480 tonnes Readers would have questioned the balance from this outlier, and so GFMS decided not to include the tonnage. According to my sources PBOC purchases were sourced from institutional supply from abroad and not through the SGE , which is a supply category not disclosed by GFMS and therefore the tonnage was a problem Note, GFMS disclosed the PBOC increment in text, but not in their balance For more information read my post PBOC Gold Purchases Separating Facts from Speculation. Gold Is More A Currency Than A Commodity. The biggest flaw of the balance model by GFMS is that it depicts gold to be more of a commodity than a currency It s focused on mine output and gold recovered from old fabricated products on the supply side, versus retail sales of newly fabricated products on the demand side In parlance of the firms, how much is produced supply versus consumed demand Official sector, ETF and exchange inventory changes are then added to the balance This commodity S D balance approach by GFMS has caused deeply rooted misconceptions about the essence of gold and its price formation. The price of a perishable commodity is mainly determined by how much is annually produced versus how much is consumed used up However, gold is everlasting, it cannot be used up and its exchange value is mainly based on its monetary applications, from being a currency, or money if you will Logically the best part of its trading is conducted in above ground reserves From my perspective the impact of global mine supply, which increas es above ground stocks by roughly 1 5 annually, and retail sales have less to do with gold s price formation than is widely assumed. Back to GFMS Have a look at the picture below that shows their S D flows for 2015.Exhibit 10 Courtesy GFMS The global S D flows for 2015.GFMS pretends total supply is mine production plus some scrap, which is then met by jewelry demand in addition to retail investment, industrial fabrication and official sector purchases The way they present it is misleading These S D flows are incomplete they suggest gold is traded like any other commodity But what about institutional S D in above ground bullion Trades that define gold as an international currency. Let s do another comparison this time between what GFMS calls Identifiable Investment demand, consisting of. versus my what I deem to be a more unadulterated approach of investment demand consisting of. Retail bar coin. Institutional demand. Total global Identifiable Investment, posted a modest 5 increase in 2015, to reach 990 tonnes. That s quite a tonnage between global Identifiable Investment by GFMS at 990 tonnes and apparent Chinese institutional demand at 1,400 tonnes We should also take into account non-apparent institutional demand, gold that changes hands in trading hubs like Switzerland Unfortunately we can t always measure institutional S D, but that doesn t justify denying its subsistence. Have a look at the chart below that shows the large discrepancy In the next chapter we ll specifically discuss the significance of investment demand in relation to the price of gold. Exhibit 11 Global Gold Investment Demand 2015.My point being what many gold market participants and observers think is total supply and demand is just the tip of the iceberg This truly is a staggering misconception create d by the firms. The global gold market H t Dan Popescu. When observing the GFMS balance in exhibit 1 its incompleteness is self-evident At the bottom we can see the line item net balance , which reflects the difference between total supply and total demand According to GFMS, if the net balance is a positive figure there was a surplus in the global gold market, and if net balance is a negative figure the market has been in deficit In the real world this figure is irrelevant Gold supply and demand are by definition always equal One cannot sell gold without a buyer, and one cannot buy gold without a seller Furthermore the gold market is deep and liquid So how come there is a difference between total supply and total demand in the GFMS balance As I ve demonstrated before, because GFMS doesn t include institutional S D that in reality makes up for the difference and far beyond In all its simplicity the net balance item reveals their data is incomplete. Let s have another stab at this How can n et balance exist in the real world, for example in 2009 According to GFMS the gold market had a 394 tonnes surplus in 2009 But how Were miners left with 394 tonnes they couldn t sell Or some supranational entity decided to soak up the surplus to balance the market Naturally, this is not what happens Total supply and total demand are always equal, but GFMS doesn t record all trades. Moreover, in my opinion the words surplus and deficit do not apply to gold There can be no deficit in gold there will always be supply At the right price that is Sometimes Keynesian economists claim there is not enough gold in the world for it to serve as the global reserve currency Austrian economists then respond by saying that there will always be enough gold at the right price I agree with the Austrians and their argument also validates why there can be no deficit in gold. There is more proof the net balance item presented by GFMS is meaningless Although according to GFMS the market had a 394 tonnes surplu s in 2009 the price went up by 25 during that year This makes no economic sense A surplus suggests a declining price, not the other way around Tellingly, S D forces presented in GFMS balances are often negatively correlated to the gold price, as was the case in 2005, 2006, 2009, 2010 and 2014 exhibit 1 In conclusion, GFMS S D balances are not only incomplete, the resulting net balance items are misleading with respect to the price Below are a few charts that demonstrate this conclusion. If we plot net balance versus the end of year price of gold we can see the correlation is often negative Have a look below Green net balance chart bars show a positive correlation to the gold price, red chart bars show a negative correlation note, the left axis is inverted for a more clear overview between any deficit surplus and the price of gold As you can see nearly half of the net balance chart bars are negatively correlated to the price of gold. Exhibit 12 GFMS gold market net balance versus the gold price We can quarrel if the net balance in 2014 was positively or negatively correlated to the price I say the correlation was negative as the gold price in 2014 remained flat in US dollars but was up in all other major currencies in contrast to the surplus presented by GFMS. Mind you, although the net balance item is often negatively correlated to the gold price, in the Gold Survey 2016 GFMS states on page 9.In terms of the Net Balance, 2015 marked the third year in which the gold market remained in surplus, and therefore it is not surprising that the bear market continued. The forecast reduction in global mine output and a gradual recovery in demand will see the physical surplus narrow in 2016, providing support to the gold price and laying the foundation for better prospects. GFMS likes to pretend any surplus or deficit arising from their balance is correlated to the price, but the facts reveal this is not true. Let us plot the physical surplus deficit line item by GFMS exhibit 1 versu s the gold price This results in even more negative correlations. Exhibit 13 GFMS gold market physical surplus deficit versus gold price. This exercise reveals that a positive correlation between either a surplus or deficit arising from a GFMS balance and the price of gold is just a coincidence No surprise when one is aware their S D data is incomplete. Remarkably, the last chart was also published in the Gold Survey 2016, but GFMS chose not to invert the left axis and doesn t disclose what we see is a surplus or deficit As a result the largest surpluses 2006, 2007, 2009, 2010 seem to correlate with a rising price, though in reality they did the opposite Compare the chart below with the one above. Exhibit 14 Courtesy GFMS. GFMS also publishes S D balances for silver a monetary metal that is comparable to gold For silver the presented correlations by GFMS between a surplus or deficit in relation to the price are even weaker. Exhibit 15 GFMS silver market net balance versus silver price, as di sclosed in the Silver Survey 2016 Exhibit 16 GFMS silver market physical surplus deficit versus silver price, as disclosed in the Silver Survey 2016.According to GFMS the silver market is always in deficit, but the price goes up and down Obviously GFMS neglects to measure institutional S D for silver. In my opinion, when Gold Fields Mineral Services GFMS was erected many decades ago they made a mistake to adopt a commodity S D balance approach Surely with the best intentions they gather intelligence and retrieve data from the market But we must be aware this is not the full picture The most significant data is not disclosed by GFMS. When it comes to what drives the price of gold GFMS and I agree it s determined by gold s role as a currency in the global economy When reading the chapter PRICE AND MARKET OUTLOOK in the Gold Survey 2016, GFMS shares its insights with respect to the gold price Factors mentioned are. Turmoil in global stock markets. A Chinese hard landing. Geopolitical tensions in the Middle-East. Central bank stimulus QE. Global economic weakness. Interest rates policy by central banks. Low risk asset safe haven demand. So if these factors drive the gold price, in what S D category would this materialize Would large investors buy and sell jewelry Or bullion bars I think the latter According to my analysis the price of gold is largely determined by institutional demand, and to a lesser extent ETF and retail bar coin demand. Let s do an exercise to see what physical gold S D trends correlate to the price The majority of supply on the GFMS balance consists of mine output and the majority of demand on the GFMS balance consists of jewelry consumption But if we plot these volumes versus the price of gold in a chart, there is no push and pull correlation For example, when the gold price surged from 2002 until 2011 jewelry consumption was not rising Neither was it outpacing mine supply The opposite happened, to be seen in the graph below This is because jewelry demand is price sensitive when the price goes up jewelry demand goes down, and vice versa Jewelry demand is not driving the price of gold. Exhibit 17 GFMS retail demand, versus mine and scrap supply versus the gold price. I also added retail bar coin demand Interesting to see is that retail bar coin demand is on one hand a price driver, moving up and down in sync with the gold price, on the other hand it can be price sensitive having brief spikes when the price of gold declines. The best correlation between physical S D in relation to the gold price can be seen in institutional and ETF S D One of the largest gold trading hubs in the West is the UK, home of the London Bullion Market that also vaults the largest ETF named GLD The UK has no domestic mine production, no refineries and national gold demand is neglectable in the greater scheme of things Therefore, by measuring the net flow of the UK import minus export we can get a sense of Western institutional and ETF demand and supply For example, if the UK is a net importer import demand being greater than export supply that signals a net pull on above ground stocks Approximately one third of the UK s net flow corresponds to ETF inventory changes, the other two thirds reflect pure institutional S D. Exhibit 18 UK net flow versus the gold price Exhibit 19 UK net flow, GLD inventory change, gross import and gross export versus the gold price. In the charts above we can observe a remarkable solid correlation between the UK s net flow and the gold price The UK is a net importer on a rising price and net exporters on declining price The shown correlation can t be a coincidence, though there s no guarantee it will prevail in the future. The two charts above show the medium long term gold price is mostly determined by institutional supply and demand in above ground reserves Effectively, GFMS is hiding the most important part of global physical gold flows. When I asked an analyst at one of the leading firms why his company doesn t measure ins titutional S D he told me candidly, because it s extremely difficult to accurately estimate it And it is As I wrote previously, I can t exactly measure global institutional S D either However, very often publicly available information gives us a valuable peek at it, and it shows to be more relevant to the gold price than what the firms keep staring at Not knowing exactly what institutional S D accounts for doesn t mean GFMS shouldn t pay attention to it. But the firms keep trying to uphold the illusion the data they ve been selling for decades is complete For if they would plainly confess it was incomplete, future business could be severely damaged. What I blame these firms is that they ve created a meme that the gold market is as large as annual mine supply This has caused all sorts of misconceptions Often I read analyses based on a comparison between quantitative demand and mine output Such analyses are likely to jump erroneous conclusions. Simplified overview gold flows 2015.Everything there is to know about the Chinese gold market and the true size of Chinese private and official gold demand Start here. This post will guide you through all relevant articles that have been published on BullionStar Blogs over the years that elucidate the mechanics of the Chinese domestic gold market and genuine Chinese gold demand If you are new to the Chinese gold market or like to refresh your memory, this post provides a staring point from where to navigate through all segments of the Chinese gold market you like to study For example, Chinese gold demand metrics, the Shanghai Gold Exchange SGE system, Chinese cross-border gold trade rules, the Chinese gold lease market and official gold reserves held by China s central bank the People s Bank Of China PBOC. The BullionStar blog posts that collectively clarify all facets of the Chinese gold market are titled Chinese Gold Market Essentials Whenever the mechanics of the Chinese gold market develop all Chinese Gold Market Essentials will be updated or new ones will be published, as to remain a comprehensive knowledge base on the largest physical gold market in the world at all times All Chinese Gold Market Essentials have been recently rewritten and the post on PBOC gold purchases contains many very important new insights. Topical data such as monthly Chinese gold import numbers will not be updated in the Chinese Gold Market Essentials however, this data will be published in new blog posts appearing on my BullionStar Blogs homepage accompanied with a link to this webpage to be complete. If there is anything unclear, if you have additional information or if you have a suggestion to improve the Chinese Gold Market Essentials please send me an email at. Understanding The Chinese Gold Market Step By Step. The unique structure of the Chinese domestic gold market, the SGE system, and why the amount of physical gold withdrawn from the vaults of the SGE published on a weekly basis can be used as a measure for Chinese wholesale go ld demand is explained in part one The Mechanics Of The Chinese Domestic Gold Market It also provides a basic understanding of contrasting metrics applied to measure Chinese gold demand, and the difference between SGE withdrawals and Chinese consumer gold demand as disclosed by the World Gold Council, which has aggregated to at least 2,500 tonnes from 2007 until 2015 For whatever reason, the World Gold Council and its affiliates continuously present feeble arguments that should explain the difference The Chinese Gold Market Essentials debunk these arguments where necessary, back up by facts and reveal genuine Chinese gold demand. More detailed rules regarding cross-border gold trade in and out of the Chinese domestic gold market and Free Trade Zones in China are discussed in part two Chinese Cross-Border Gold Trade Rules. When fully comprehending the mechanics of the Chinese domestic gold market and Chinese cross-border gold trade rules you can continue reading Workings Of The Shanghai I nternational Gold Exchange about the international subsidiary exchange of the SGE set up to become the major gold trading hub in Asia Related is SGE Withdrawals In Perspective that discusses how trading activity on the Shanghai International Gold Exchange SGEI can potentially blur our view on Chinese wholesale gold demand when measured by SGE withdrawals. Congratz At this point you have a thorough understanding of the Chinese gold market To Study more about the difference please continue with Chinese Commodity Financing Deals Explained , which is mainly about the Chinese gold lease market The post also includes many links to additional posts about the Chinese gold lease market, among others, a paper written by the PBOC in 2011 exclusively translated by BullionStar For a detailed study on the difference, and thus genuine Chinese gold demand, please read Why SGE Withdrawals Equal Chinese Gold Demand And Why Not The Argument List. Finally, please read PBOC Gold Purchases Separating Facts fr om Speculation for studying the amount of gold accumulated by China s central bank in recent years in addition to private reserves At the end of the post you can find an overview of the estimated amounts of above ground gold in China privately owned gold and official holdings This post has collected many new contributions in recent months, a must read. As part of the wide analysis of the Chinese domestic gold market I would like to share that since the seventies there is a special army in China dedicated to gold It s called The Gold Armed Police if you can read Chinese have a look at this Wikipedia page. It s no coincidence this army came into existence in 1979, eight year after the US left the gold standard and when China started opening up under the guidance of Deng Xiaoping As, this was the moment the Chinese slowly started to reform their economy and made the first preparations in their gold market They knew, among others the global dollar standard wouldn t last forever. On 29 October 1976 representatives of the Chinese central bank and the Federal Reserve US, Arthur Burns met in China and discussed international economics From Wikileaks. IN INTERNATIONAL ECONOMICS, THE DISCUSSION CONSISTED MAINLY OF QUESTIONS BY THE CHINESE AND ANSWERS BY DR BURNS, ALTHOUGH THE CHINESE VIEW THAT INFLATION IS A SYMPTOM OF ECONOMIC WEAKNESS CAME THROUGH CLEARLY THE CHINESE ASKED ABOUT DR BURNS VIEWS OF THE IMF CONFERENCE AND WERE PARTICULARLY INTERESTED IN THE IMF GOLD AUCTIONS, AND THE ISSUANCE OF SDR S THE CHINESE ASKED ABOUT THE PROBLEM OF CONTROLLING THE 200 BILLION IN EURODOLLARS, AND GAVE THE IMPRESSION THAT THEY CONSIDERED THE EURODOLLAR MARKET A THREAT TO EXCHANGE RATE STABILITY, WHICH BY IMPLICATION THEY SEEMED TO FAVOR THEY ALSO ASKED ABOUT COMPARATIVE GROWTH RATES AMONG THE OECD COUNTRIES AGAIN, THE CHINESE BANKERS WERE WELL INFORMED AND HAD THEIR QUESTIONS WELL PREPARED. In the quote from Wikileaks we can clearly read the Chinese were interested in gold However, the Chines e economy was completely centrally planned at the time and they were not a member of the World Trade Organization or the giant exporter of goods they are now Therefor, I suspect China had little resources to acquire gold in the seventies China s foreign exchange reserves were very small while they urgently needed to increase their reserves. Initially the Gold Armed Police was established to develop China s domestic mining industry China s domestic mining output grew by an incredible 2,964 from 1976 until 2014, according to data from the China Gold Association, and this was partially due to gold exploration by the Gold Armed Police. Remember that before 2002 the PBOC had the monopoly on all gold trade in China Mining output and potential import was transferred to the PBOC that set the domestic gold price and distributed the gold to a limited amount of designated jewelry shops or kept the metal for its official reserves The Gold Armed Police and the PBOC must be closely associated. Next to exploration the Gold Armed Police was also assigned to guard the mines and to do other tasks And here is where it becomes interesting Gold market insider James Rickards has written in The Death Of Money 2014.A senior manager of G4S, one of the world s leading secure logistics firms, recently revealed to a gold industry executive that he had personally transported gold into China by land through central Asian mountain passes at the head of a column of People s Liberation Army tanks and armored transport vehicles This gold was in the form of the 400- ounce good delivery bars favored by central banks rather than the smaller one - kilo bars imported through regular channels and favored by retail investors. Although Rickards notes the convoy was lead by the People s Liberation Army I think it s very likely the Gold Armed Police was involved in this transport that contained monetary gold directed to PBOC vaults We can speculate the Gold Armed Police is active in distributing the PBOC s monetar y gold into the mainland. The Gold Armed Police in April 2011, about 100 soldiers from the 7th detachment in Xinjiang. The other day I spoke to a gold market insider, that likes to remain anonymous, who told me some central banks send their own airplanes to London to pick up monetary gold when we were discussing purchases from China s central bank in the UK I m quite sure the PBOC has bought a substantial amount of gold in London in recent years and I suspect the Gold Armed Police is distributing the monetary metal. So how does the PBOC buy gold in London Through which proxy do they do they purchase the metal Well, that s hard to say But, if I may freely speculate the Bank Of China is part of this If we read the Chinese Wikipedia page about the Foreign Exchange Reserves of the People s Republic of China not the English page it states. The FX reserves of the Chinese mainland are State-owned assets and managed by SAFE and the PBOC, the actual business operations are carried out by the Bank o f China. SAFE State Administration Of Foreign Exchange is the largest Chinese sovereign wealth fund that manages the PBOC s foreign exchange reserves. The Bank Of China is a commercial state-owned bank and LBMA member that can be one of the proxies for the PBOC s monetary gold purchases around the globe So, possibly the Bank Of China buys gold in the London OTC market, which is then transported by the Gold Armed Police to PBOC vaults in Beijing. Below is an article I found on The China Times about the Gold Armed Police. Source The China Times, Global Edition. China has a military unit dedicated to gold exploration, this unit is the only one of its kind in the world. The gold exploration unit was established in the beginning of China s reform and opening up, when the country urgently needed to increase its gold reserves The unit has found more than 1800 tons of gold so far, helping China become the world s largest gold-producing country. China s annual gold production was merely 4 tons when PR C was founded After the gold exploration unit of the Chinese People s Liberation Army was established in 1979, 12 detachments were sent to all over China The picture shows soldiers from the 7th detachment of the gold exploration unit singing songs on their way in March 2006.Gold reserves are usually located in remote and inaccessible areas The picture shows soldiers from the 8th detachment of the gold exploration unit fighting sandstorm in Lop Nur in August 2002.In 1995, China s gold production for the first time exceeded one hundred tons, taking the 8th place in the world More than half of the gold reserves were found by the gold exploration unit Eight years later, China s annual gold production exceeded 200 tons The picture shows a soldiers from the 8th detachment of the gold exploration unit carrying out explosion works in August 2002.July 2000, soldiers from the 8th detachment panning alluvial gold in Xinjiang In 30 years, the gold exploration unit has found many large-scale gold d eposits, in total found more than 1800 tons of proven gold reserves. Lop Nur, August 2002, soldiers from the 8th detachment cooking meals in tent, two days later, the tent was swept away by flood. Lop Nur, August 2002, soldiers from the 8th detachment having lunch together. April 2011, about 100 soldiers from the 7th detachment carrying out geology and resources survey tasks in Xinjiang. May 2011, soldiers from the 6th detachment taking a break after long-hours hard work in Qilian Mountain, Qinghai. Natural gold nugget found by the gold exploration unit in 1983, it contains 1114 grams of pure gold. A seminar about gold supporting the internationalization of the renminbi and China s financial strength was held in Beijing on 18 September 2015 One of the keynote speakers was Song Xin, President of the China Gold Association CGA , Chairman of the Board of China International Resources Corporation, President of China National Gold Group Corporation and Party Secretary, who believes China s econom ic power must be serviced by appropriate gold reserves to support the renminbi An article written by Song published on Sina Finance in 2014 stated translation by BullionStar. For China the strategic mission of gold lies in the support of renminbi internationalization Gold forms the base for a currency moving up in the international arena. If the renminbi wants to achieve international status, it must have popular acceptance and a stable value To this end it is very important to have enough gold as the foundation and raising the gold content of the renminbi T herefore, to China, the meaning and mission of gold is to support the renminbi to become an internationally accepted currency and make China an economic powerhouse. That s why, in order for gold to fulfill its destined mission, we must raise our gold holdings a great deal, and do so with a solid plan Step one should take us to the 4,000 tonnes mark, more than Germany and become number two in the world, next, we should increase step by step towards 8,500 tonnes, more than the US. President of the CGA before Song was Sun Zhaoxue who shared many of the viewpoints of his successor In 2012 a famous article from Sun was published in Qiushi magazine , the main academic journal of the Chinese Communist Party s Central Committee, wherein he plead for stimulating the Chinese citizenry to buy gold next to increasing China s official gold reserves translation by BullionStar. Currently, there are more and more people recognizing that the gold is useless story contains too many lies Gold now suffers from a smokescreen designed by the US, which stores 74 of global official gold reserves, to put down other currencies and maintain the US Dollar hegemony Effectively, the rise of the US dollar and later the euro currency, from a single country currency to a global or regional currency was supported by their huge gold reserves. Individual investment demand is an important component of China s gold reserve system, we should encourage indi vidual investment demand for gold Practice shows that gold possession by citizens is an effective supplement to national reserves and is very important to national financial security. Regular readers of this blog will know what Sun wrote in 2012 regarding individual gold investment is exactly what has unfolded through the Shanghai Gold Exchange SGE we could see thousands of tonnes of gold moving into the mainland in recent years According to my estimates Chinese privates gold holdings have reached 12,000 tonnes next to the People s Bank Of China s PBOC gold buying program. Since my last extensive blog post 20 May 2015 on PBOC gold purchases I ve been able to collect more clues related to the amount of gold China s central bank has harvested in exchange for its lopsided US dollar holdings Last week I spoke to an insider with connections at Western bullion banks This gentleman confirmed proxies of the PBOC purchase gold directly in the London OTC gold market that is shipped to Beijing Impl ying much of the 1,750 tonnes that have mysteriously vanished from the London Bullion Market left London without being disclosed in UK customs statistics in between 2011 and early 2015 went to China This supports the analysis the PBOC is buying at a pace of 500 tonnes a year in the international OTC market not through the SGE and owns approximately 4,000 tonnes by now. Furthermore, it seems the writings from Song and Sun correspond with China s real undertakings in the gold market, which influences our valuation of their words There are no transcripts from the seminar in September, but I found an article in Chinese that summarizes what Song and others have said Please read the gripping translation below. Note, Song is the President of China National Gold Group Corporation, which started an alliance with Russian gold miner Polyus Gold to deepen ties in gold exploration China and Russia aim to trade newly mined gold over the Shanghai International Gold Exchange in renminbi for internationa l institutions and central banks as part of the Silk Road Gold Fund to attract the center of the international gold market towards the East. Renminbi Internationalization and China s Gold Strategy Seminar. On 18 September 2015 the Renminbi Internationalization and China s Gold Strategy Seminar was smoothly held in Beijing The seminar was guided by the China Gold Association and jointly held by the Chinese Gold Research Center of Capital University of Economics and Business and Beijing Gold Economic Development Research Center It was supported by Zhao Jin Futures, Shandong Zhaojin Investment Co Ltd Shenzhen Jinmingzhu Jewelry Co Ltd and Chifeng Jilong Mining Industry Co Ltd. Over 130 representatives from the governments, banks, gold mining industry, gold investment organizations, jewelry companies and educational institutions attended the seminar Wang Wenju, Vice President of Capital University of Economics and Business announced to rename the Chinese Gold Market Research Center of Capital University of Economics and Business on the seminar site. Wang Jiaqiong, President of Capital University of Economics and Business, Song Xin, President of Chinese Gold Association General Manager and Secretary of the Party Committee of China National Gold Group Corporation Wang Xiaomei, Deputy Party Secretary of China National Gold Group Corporation, Wei Benhua, Former Director of the State Administration of Foreign Exchange and Former General Representative of Chinese International Monetary Fund, and other leaders and representatives attended the seminar 13 experts from China Gold Association, Shanghai Gold Exchange, Renmin University of China, Chinese Social Science, Capital University of Economics and Business, China Center for International Economic Exchanges, China Forex Investment Research Institute, Gold Economic Research Center, ICBC, China Construction Bank, Shandong Gold Group and Shandong Zhao Jin Group delivered splendid speeches. President Wang Jiaqiong delivered a speech I n his speech, Wang Jiaqiong pointed out, RMB internationalization is a struggling process in need of strategic research In the seminar, many experts, scholars and entrepreneurs were discussing renminbi internationalization and Chinese gold strategies They would propose wise ideas and good policy suggestions after brainstorming, playing as a think tank in the development of China The research team led by Professor Zhu Heliang from our university spent years studying Chinese gold strategy problems and some research results obtained the central affirmation and recognition All of your arrival can better support our in-depth research on relevant topics and construction of related disciplines. In the opening ceremony, Wang Wenju announced the renaming of the Chinese Gold Market Research Center of Capital University of Economics and Business, which focuses on the current gold market, to Chinese Gold Research Center of Capital University of Economics and Business with the purposes of better stu dying gold problems comprehensively, displaying the function of gold in national economy and society, boosting renminbi internationalization and keeping pace with the times The school would offer vigorous support and hope that the new research center can strengthen team building and display think tank functions. In his speech, Song Xin mentioned that the Chinese gold industry has achieved a great-leap-forward development since the new century In 2014, Chinese gold yield had turned China into the biggest gold producing country in the world for eight consecutive years and the biggest gold consumption country again Whether in the past, present or future, gold plays a crucial role in the development of human society Renminbi internationalization has boosted China s march towards an economic power from an economic giant The new age has endowed gold with more important missions Gold has shouldered a heavy responsibility of increasing credit for renminbi internationalization and increased the gold content for renminbi internationalization. Recently, the Central Bank announced to increase gold reserves to the public many times in succession In fact, it s the strategic layout and major move for laying the renminbi s international credit foundation We always suggest formulating and boosting national gold strategies in pace with national financial strategies positively, further improving the quantity and proportion of gold in national foreign exchange reserves, developing occupancy volume of gold production and increased gold resources We further suggest perfecting the gold market, promoting foreign currency in individuals, boosting Chinese and western wealth flowing, improving our control power of global gold wealth flowing, accelerating renminbi internationalization, helping the renminbi enter special drawing rights currency basket rebuilding international currency system, balancing American hegemony process, and positively displaying the due function of gold and the gold indu stry Leaders from Capital University of Economics and Business have supported the research on gold problems for a long time The team led by Professor Zhu Heliang has persistently pursued basic research on gold with outstanding viewpoints They have obtained relevant departments high attention for long I hope that Capital University of Economics and Business can further display its gathering advantages of majors and talents, and strengthen the cooperation with Chinese Gold Research Center, China National Gold Group Corporation and its subordinate companies. In the seminar, experts thoroughly analyzed the essence and inherent laws of renminbi internationalization, new positioning and functions of gold in the non-gold standard currency system They discussed the strategic significance of gold in renminbi internationalization from historical and actual perspectives and Chinese gold strategies in the new age Experts unanimously regarded gold as playing an irreplaceable role in currency interna tionalization progress The important element of gold shouldn t be ignored during renminbi internationalization The country should attach great importance to the development of the gold industry and market and increase gold reserve from a strategic height. The seminar is the prelude of the first renminbi internationalization and Chinese Gold Strategy Research Project jointly carried out by Chinese Gold Research Center of Capital University of Economics and Business and Beijing Gold Economic Development Research Center After the seminar, key viewpoints were to be collected and submitted to related departments Chinese Gold News will set up a special column and publish solicited articles about renminbi Internationalization and Chinese Gold Strategies Meanwhile, two organizations will organize special research teams, focus on the topic research of renminbi internationalization and Chinese Gold Strategies , and open the research results for publication With national major strategy research as their own duty, the two organizations have formed a strategic alliance in terms of promoting renminbi internationalization and adjusted research directions of Chinese gold strategies in order to make effort and contribution to the prosperous cause of China. Shanghai Gold Exchange SGE withdrawals in week 50 December 8 12 accounted for 50 tonnes, year to date 1,955 tonnes have been withdrawn. Blue is weekly gold withdrawn from the vaults in Kg, green is the total YTD. SGE Withdrawals In Perspective. I have written about this before, but I just want to make sure I have clearly shared my view on this subject if you ve read all my previous posts regarding withdrawals you can skip this chapter. Many blogs are tracking SGE withdrawals currently, using it as the yardstick for Chinese wholesale gold demand While partially true I would like to emphasize this yardstick has become elastic. Before the SGE s subsidiary, the Shanghai International Gold Exchange SGEI , was launched total SGE withdrawals provided us a clear view on Chinese wholesale gold demand, as the SGE is the exchange where all import and domestically mined gold is required to be sold first in addition to scrap before entering the Chinese domestic market This clear view is now blurred. The SGEI facilitates gold trading in the Shanghai Free Trade Zone FTZ Physical gold trading in the FTZ is completely separated form the Chinese domestic gold market, which is a closed market bullion exports are prohibited and only 15 banks are licensed to import bullion The banks that enjoy a PBOC bullion import license are. Shenzhen Development Bank Ping An Bank. Industrial and Commercial Bank of China. Shanghai Pudong Development Bank. Agricultural Bank of China. Bank of Communications. China Construction Bank. China Merchants Bank. China Minsheng Bank. Standard Chartered. Bank of Shanghai. Industrial Bank. Bank of China. The gold traded on the SGEI can be withdrawn from the vaults in the FTZ by foreign enterprises and shipped abroad, these SGEI withdrawals are captured in the total SGE withdrawals only aggregated withdrawals are disclosed and thus distorting our view on Chinese wholesale demand. Would we get our clear view back if SGE and SGEI withdrawals would be disclosed separately No This is because Chinese domestic banks are also trading on the SGEI, when they withdrawal from the vaults in the FTZ they can import this gold into the mainland without it being required to be sold again through the SGE. The trading volume purchases on the SGEI contracts iAu100g, iAu99 99 and iAu99 5 can be. Not withdrawn at all and thus not distorting our view on Chinese wholesale demand. Withdrawn by foreign traders and thus distorting Chinese wholesale demand If we knew how much these withdrawals accounted for we could subtract them from total SGE withdrawals to have a clear view on Chinese wholesale demand Unfortunately we don t know these numbers. Withdrawn by Chinese domestic banks to be imported into the mainland and thus being part of Chi nese wholesale demand. This is what we I know at this stage Concluding weekly Chinese wholesale gold demand is at most total SGE withdrawals at least total SGE withdrawals minus SGEI trading volume. For example, in week 50 total SGE withdrawals accounted for 50,027 5 Kg Total SGEI trading volume accounted for 6,159 Kg Meaning Chinese wholesale gold demand was somewhere in between 50,027 5 Kg and 43,868 5 Kg 50,027 5 6,159 Year to date Chinese wholesale gold demand is somewhere in between 1,911,230 Kg and 1,955,090 Kg at least 1,911 tonnes. Needless to say, if more information is disclosed by the SGE I will report about it as soon as possible. Furthermore Chinese wholesale gold demand is supplied by import, mine and scrap The amount of mine supply we know from numbers of the China Gold Association CGA , in 2014 it will be approximately 451 tonnes The composition of the other two supply flows is not known, for this we have to make estimates based on numbers from previous years In 2012 scrap through the SGE was 232 tonnes, in 2013 it was 247 tonnes This year scrap is likely to be substantially higher How come By way of measuring Chinese wholesale gold demand as described above, it was at least 1,841 tonnes in the first eleven months of this year The Chairman of the SGE said on a conference import was approximately 1,100 tonnes over this period and mining had to be 416 tonnes, setting scrap at 325 tonnes. Nevertheless, China will import far more than 1,100 tonnes in 2014, added to 451 tonnes of domestically mined gold, the Chinese people will add about 1,700 tonnes to their reserves Assuming the PBOC doesn t buy gold through the SGE. Will Chinese Gold Demand End 2014 With A Boom. Seasonally December and January are strong months for Chinese gold demand, but will they be this year To answer this question let s have look at the next chart. We can see elevated withdrawals every December and January Additionally, it s clear the Chinese rather buy gold when the price is declining th an when it s rising, unlike Western gold investors This thesis is also supported by the fact SGE premiums often move inverted from the price of gold. Now let s zoom in on the former chart. Though withdrawals are strong, in my opinion demand is somewhat held back by a rising price of gold in the past few weeks How withdrawals demand will develop around New Year is of course partially determined by the direction of the price of gold If the price of gold continues to rise in renminbi I expect it will further dampen Chinese demand around New Year and Lunar Year. Chinese Gold Trading Volumes. Worth mentioning is that SGE gold trading volume is going up exponentially since a couple of weeks The biggest drivers are the Au T N1 and Au T N2 deferred contracts On November 3, 2014, the SGE adjusted the specifications of these contracts that hadn t been traded at all since October 2013, after which volumes skyrocketed In week 50 the volume of these contracts combined accounted for 95 tonnes, which is 20 of the total SGE gold volume traded 474 tonnes. Red trading volume of Au T N1 and Au T N2 counted bilaterally Purple total SGE gold trading volume in week 50 counted bilaterally. Total gold volume traded on the SGE combined with the total gold volume traded on the Shanghai Futures Exchange SHFE accounted for 1,309 tonnes in week 50 This amount was more than half the gold volume traded on the COMEX in the same period 2,507 tonnes I don t see a trend of declining volumes on the COMEX, but I do see a trend of surging volumes in China, that are now starting to near COMEX volumes. On December 9, 2014, Albert Cheng, Managing Director Far East of the World Gold Council, was interviewed by the China Gold Network The interview was published in Chinese only. The Gold Demand Trends published each quarter by the World Gold Council WGC , show aggregated Chinese consumer demand Q1 Q3 2014 was 638 4 tonnes But, in the interview Cheng notes that the chairman of the Shanghai Gold Exchange SGE , Xu Luode , has stated the SGE was supplied by 1,100 tonnes of gold import in the first eleven months of 2014 and this number may reach 1,250 tonnes by year end Supplemented by 450 tonnes of domestic mine production this year total demand should reach about 1700 tonnes , said Cheng. I have been long disputing Chinese gold demand numbers from the WGC, as total supply Chinese net import, domestic mining and scrap persistently has been transcending the WGC numbers The WGC has never been able to elucidate the difference between massive supply and their demand numbers The aggregated difference from 2007 until present is about 3,000 tonnes. The total supply can be tracked on a weekly basis by SGE withdrawals, which have proven to be the best proxy Though the import and scrap composition of SGE withdrawals can only be estimated until confirmed by the SGE or China Gold Association. And so I was surprised Cheng openly in Chinese elaborated on the SGE model and instead of solely talking about how much gold w as sold at retail level, also expanded on how much gold is actually added to Chinese non-government gold reserves measuring import and domestic mine production that are prohibited from being exported from the mainland. The next quote is translated by LK, gold investor from Hong Kong who we all should be very thankful for his work. The China Gold Network The recently published Q3 Gold Demand Trends report says that China s gold demand is down year-on-year How do you interpret this. Albert Cheng This year, the Q3 gold demand figure that we publish is down because last year s gold demand was a special case Given that last year compared to 2012 same time was up 40 , there really is nothing strange However, if we compare this year s Q3 figure to the average of the last 5 years at this time, we still find positive growth, and still up slightly compared to 2012.Using the numbers supplied by Xu Luode, they in fact show that China imported about 1100 tonnes of gold in the first 11 months this year through the SGE, and may reach 1200 to 1300 tonnes by year end Adding together domestic production, total demand should reach about 1700 tonnes So, the energy of the China gold market hasn t diminished compared to last year, the development is still healthy. For clarity the translator is a native Chinese speaker and a financial expert The translation has been confirmed by a second native Chinese speaker and financial expert, which severely limits the probability of the Chinese text being misinterpreted. As my regular readers know I often make estimates of Chinese net import using SGE withdrawals as a proxy Last week I estimated China in the first 11 months of 2014 imported 1,200 tonnes, we now know now I probably overestimated gold import by 9 1,200 tonnes vs 1,100 tonnes. In hindsight it s always more easy to analyze I think what happened is that in mid 2014 March and June a part of the SGE withdrawals supply composition shifted from import to scrap If scrap went up, import went down, a s. In the chart above we can see premiums going negative in March and June while withdrawals staying relatively strong This means domestic supply scrap was increasing relative to import, hence the gold in China became cheaper than in London The reason the discount isn t immediately arbitraged is because gold in China is prohibited from being exported. The dip in Chinese gold import was also reflected in export from Hong Kong to China mainland. Because scrap apparently was more than I calculated in my model I can now adjust the model If from January until November import was 1,100 tonnes and mining was 413 tonnes, than scrap had to be 328 tonnes, as withdrawals were at least 1,841 tonnes in the mainland. Additionally, elevated scrap means quite some Chinese have been selling physical gold that found its way to the SGE Perhaps some were expecting the price to rise sooner I don t think elevated scrap signals leases were unwound if a lease expires the lessee is most likely to buy gold on the S GE, it would not make sense for him to buy gold in the domestic market to bring to the SGE in order the repay the loan. SGE withdrawals in week 49 have dropped by a whopping 28 w w, to 38 tonnes Year to date withdrawals stand at 1,905 tonnes. However, when corrected by SGEI trading volume withdrawals in week 49 could have been as low as 27 tonnes, which was not expected for the seasonally strong December month Year to date withdrawals corrected for SGEI volume is 1867 tonnes. Let s wait what next week will bring to see if China will reach the 1,700 tonnes. This post is part of the Chinese Gold Market essentials series Click here to go to an overview of all Chinese Gold Market Essentials for a comprehensive understanding the largest physical gold market globally. This event is a major milestone in China s opening of its financial market to foreign investors The Shanghai International Gold Exchange will bolster China s gold market toward greater trading volume and further highlight the price discovery function of the gold market , said Zhou Xiaochuan governor of the People s Bank Of China at the opening ceremony of the Shanghai International Gold Exchange SGEI 18 September 2014 0.The launch of the SGEI which is also referred to as the International Board is an important step for China s process of financial liberalization, opening up, going out and internationalizing the renminbi. On 18 September 2014 the Shanghai Gold Exchange SGE, or Main Board launched it s subsidiary the Shanghai International Gold Exchange SGEI, or International Board physically vested in the Shanghai Free Trade Zone This article covers how the SGEI operates and how its connected to the SGE and the rest of the world. The Working Of The Shanghai International Gold Exchange. The SGE and SGEI are physically separated exchanges, although they operate under the same umbrella the Exchange hereafter They re separated in order for the International Board IB to facilitate gold trading in renminbi for international members customers, completely segregated from the domestic market The PBOC doesn t allow gold export from the domestic market, but does provide an exchange that offers gold contracts denominated in renminbi Hence the SGEI is located in the Shanghai Free Trade Zone SFTZ which in terms of cross-border gold trade is a separate region from the Chinese domestic market 1 However, with the IB the Chinese government has conceived a link between the Chinese domestic gold market and the international gold market. The SGEI is an international exchange where international members customers of the Exchange can trade gold exclusively in renminbi Any international member customer can trade SGEI gold products contracts and the gold can be freely imported and exported from the SFTZ But international members customers can also trade the Main Board MB SGE products although the related metal located in the Chinese domestic market is prohibited from being withdrawn load out from SGE certified vaults by international members customers. The SGE is the core exchange in the Chinese domestic gold market where domestic members customers of the Exchange can trade gold exclusively in renminbi Additionally, domestic members customers can trade all IB products although they cannot withdraw this gold located in the Shanghai Free Trade Zone from SGEI certified vaults An exception is made for members customers holding a License by the PBOC to import gold into the Chinese domestic market. The next quote is from an announcement published on the SGE website 1 1 on 16 September 2014 and supports what was just described. No 3 The products that international members and international customers can trade include 3 International Board products and 8 Main Board products However, the y can only deposit and withdraw on the international products. No 4 Domestic members and domestic customers can participate in trading all the International Board products, but can t deposit and withdraw on the International Board products the members with import and export qualifications excluded. In the overview below every SGE I product is listed, next to all members customers trading privileges. Exhibit 1 Courtesy Spot Trading Rules of the Shanghai Gold Exchange. As mentioned before the SGEI certified vaults are located in the SFTZ On the Exchange s website we read the SGEI certified vaults are owned by the Bank Of Communications 2 According to China s state TV network CCTV this vault has a capacity of 1,000 tonnes 3 Global gold vaulting and transportation company Malca-Amit opened a 2,000 tonnes vault in the SFTZ in November 2013 4 Possibly, this vault will become an SGEI certified vault in the future. All SGE I Products. With the inception of the SGEI 3 new physical products have been introduced at the Exchange in September 2014 The IB products are. iAu100g physical product 100 gram gold bar fineness 999 9.iAu99 99 physical product 1 kg gold ingot fineness 999 9.iAu99 5 physical product 12 5 kg gold ingot fineness 995 0.In addition to the IB products international members customers can trade 8 MB contracts divided in 2 categories, 4 physical and 4 deferred products. Au100g physical product 100 gram gold bar fineness 999 9.Au99 99 physical product 1 kg gold ingot fineness 999 9.Au99 95 physical product 3 kg gold ingot fineness 999 5.Au99 5 physical product 12 5 kg gold ingot fineness 995 0.Au T D deferred product 1 kg gold ingot fineness 999 5.Au T N1 deferred product 1 kg gold ingot fineness 999 5.Au T N2 deferred product 1 kg gold ingot fineness 999 5.mAu T D deferred product 100 gram bar fineness 999 9.One MB product can exclusively be traded by domestic members customers. Au50g physical product 50 gram gold bar fineness 999 9.According to the rulebooks of the Exchan ge gold bars weigh 0 05 kg, 0 1 kg and gold ingots 1 kg, 3 kg, 12 5 kg 5.The SGEI Connects The Onshore And Offshore Renminbi Markets. The Exchange connects the onshore and offshore renminbi market because both SGE and SGEI products can be traded with onshore and offshore renminbi and both currency have the same value Domestic members customers can trade SGE and SGEI products, notable using either onshore or offshore renminbi In turn, international members customers can trade SGE and SGEI products using either onshore or offshore renminbi Effectively, the Exchange connects the onshore and offshore renminbi markets. For more clarification on the flows of physical gold and renminbi between the SFTZ and the Chinese domestic gold market have a look at the graph below. Exhibit 2 Physical gold and renminbi movement between the Chinese domestic market and the Shanghai Free Trade Zone. More exact rules can be read below in parlance of the Exchange From the Detailed Rules for Physical Delivery of th e Shanghai Gold Exchange 6.A Domestic Member or Domestic Customer may deposit physical bullions deliverable on the Main Board into a Main Board Certified Vault MB Certified Vault for short the member or customer is not permitted to deposit physical bullions deliverable on the International Board into any MB Certified Vault, nor may the member or customer deposit any physical bullions into any International Board Certified Vault IB Certified Vault for short. An International Member or International Customer who has obtained an approval from the Exchange may deposit physical bullions deliverable on the International Board into an IB Certified Vault Furthermore, an International Member or International Customer who has obtained an approval may deposit, within its permitted quota, physical bullions deliverable on the Main Board into an IB Certified Vault An International Member or International Customer is not permitted to deposit bullions into an MB Certified Vault. Each Domestic Member an d Domestic Customer may withdraw physical bullions deliverable on the Main Board from an MB Certified Vault, but is not permitted to withdraw physical bullions deliverable on the International Board from an MB Certified Vault Except for those members and customers qualified to import and export gold, no Domestic Member or Domestic Customer is permitted to withdraw bullions from an IB Certified Vault Any Domestic Member or Domestic Customer that has gold import and export qualifications may withdraw physical bullions deliverable on the International Board from an IB Certified Vault. From the Operating Guidelines for International Board Deliveries Of the Shanghai Gold Exchange 7.an International Member or International Customer whose application is approved may, within the permitted quota, deposit physical bullions deliverable on the Main Board into an IB Certified Vault. Any approved International Member or International Customer that sells physical bullions deliverable on the Main Board must engage a member which has the gold import export qualification to carry out the import procedures on its behalf, and pay import agent fees for the fulfillment of such import procedures. From the Spot Trading Rules of the Shanghai Gold Exchange 5.Domestic members can trade on the IB Where physical bullions are delivered and transported into the customs and deposited into a Main Board Certified Vault, the Exchange will further issue a SGE Execution Statement to the Domestic Member or the customer qualified to import gold for customs declaration purposes. All Chinese Gold Market Essentials Articles. In the financial section of the biggest newspaper in The Netherlands, De Telegraaf an article was published on March 22 about a growing Dutch population investing in physical gold a young generation is becoming more aware of finance and is acting accordingly This generation no longer chooses to save in saving accounts, but prefers to buy physical gold They see their parents don t receive the ir promised pension and they expect themselves to get even less They spent each month, for example, 200 or 300 euros on physical gold. The article is titled Youth Buys Goldbars From De Telegraaf. More and more young people are buying gold coins and bars to ensure their retirement According to a Dutch gold dealer The number of these customers has tripled in 2013.According to Marleen Evertsz of GoldRepublic, an online trading platform for physical gold, the young gold investors have little to none confidence in traditional pension funds They prefer something tangible It s the new generation that can t get a mortgage but do have a student loan They see their parents don t receive their promised pension and they expect themselves to get even less They spent each month, for example, 200 or 300 euros on physical gold. I notice the same developments in my surroundings I m young and Dutch It s the generation who reads news from the internet instead of the mainstream media, vividly spreading aware ness about economics, that is changing its views about prudent saving from pension funds to hard assets such as physical gold and silver. These are often young entrepreneurs who can just afford to invest a little in gold , says Jaap Raijmans, gold dealer at Goudstandaard, of this growing group Saving like their parents did hasn t been smart for years They prefer to put some physical gold in the vault.
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