Unprecedented Total Chinese Gold Demand For 2013 Was 2,181 Tons TNR.v, MUX, GLD, GDX, RGLD

  

  Yesterday WSJ, Reuters and Bloomberg have created a lot of buzz in mass media about unprecedented Chinese Gold demand of over 1,000 tons in 2013. Koos Jansen reports that actual demand was almost double that and stands at 2,181 tons of Gold, excluding PBOC purchases! Koos Jansen makes the great work of the forensic investigation of the real Gold market in China and his work is highly recommended for all interested in the gold market.
  Gold is trading higher today at high $1287 in Asia after breaching $1270 level. The Mother Of Short Squeeze has finally arrived in the Gold market and Janet Yellen testimony today will provide the catalyst.

Toby Connor: The Great Inflation Of 2014 - Gold And Silver To Rise TNR.v, MUX, GDX, GLD, SLV

"Toby Connor provides very interesting technical view on the general markets, Commodities, Gold and Silver. Nobody can find inflation these days and his take on the final rise and bust in the general markets is very intriguing. Our own observations confirm the CRB - Commodities Index breakout and that Gold is knocking on the $1270 with huge break out to the upside after that. Supply and Demand picture provides further support to the technical observations in Gold and Silver markets these days. Where the Gold will come from in the future with China record buying continued? M&A activity will be driving the next Bull market in Gold and Silver miners."

Jim Rickards: Gold Set for Massive Rally TNR.v, MUX, GDX, GLD, SLV, RGLD, ABX, GG

  "Jim Rickards presents his hew book and talks about the real fundamentals supporting his call for the much higher price of Gold. It is the very good piece to continue our conversation about the state of the Gold market and its ongoing manipulations this weekend."

In Gold We Trust:

Unprecedented Total Chinese Gold Demand 2013

Friday the numbers were released on total Chinese gold demand for 2013. Total demand can be measured by the amount of physical gold that is withdrawn from the vaults of the Shanghai Gold Exchange. In the last full trading week (#52, December 23 – 27) of 2013 there were 53 tons of physical gold withdrawn, which brings the yearly total to 2181 tons. Yes, total Chinese demand for 2013 was 2181 tons, excluding PBOC purchases. All my sources in the mainland state the PBOC would never buy its gold through the SGE, so total demand including PBOC purchases may have reached well over 2500 tons.  Which would imply total net import was 2000 tons (as I have written extensively about here).

Since November demand for physical gold has surged, weekly withdrawals have been above average,transcending weekly global mine production. Not only did we observe strong demand at the SGE, it was also perceived in an incredible shopping spree at jewelry shops around new year. From Want China Times:

….Many Chinese gold buyers have been happy to see the price drop as this is traditionally peak season for gold purchases before the Lunar New Year holiday and the recent slump will allow them to buy gold at relatively low prices.

“It is a good deal. It can be seen as an investment when gold prices go up in the future,” a customer said. 

The sales had surged by at least 20% in December 2013 from a month earlier and were up by 15%, compared with the same period in 2012.

Of the sold items, products related to the upcoming Year of Horse were the most sought after in stores.

January 1, 2014 Beijing

January 1, 2014 Ningbo, Zhejiang

January 1, 2014 Beijing

Throughout week 52 GOFO has remained negative in London, GLD lost 4.5 tons and on the Shanghai Gold Exchange premiums increased to 2 %.

Overview Shanghai Gold Exchange data week 52

- 53 metric tonnes withdrawn from the SGE vaults in week 52 (23-12-2013/27-12-2013)

- w/w  - 3.95 %

- 2181 metric tonnes withdrawn in 2013
- weekly average 41.94 tonnes in 2013

Source: SGE, USGS

For more information on SGE withdrawals read this, this, this and this.

This is a screen dump from Chinese SGE trade report; the second number from the left (本周交割量) is weekly gold withdrawn from the vault, the second number from the right (累计交割量) is the total YTD.

This chart shows SGE gold premiums based on data from the SGE weekly reports (it’s the difference between the SGE gold price in yuan and the international gold price in yuan).

Below is a screen dump of the premium section of the SGE weekly report; the first column is the date, the third is the international gold price in yuan, the fourth is the SGE price in yuan, and the last is the difference.

Overview Chinese Gold Demand 2013

2013 has been a spectacular year wherein the pice of gold fell 29 %, but Chinese gold demand has been unprecedented and may have reached, PBOC purchases included, over 2500 tons. Exposing a disparity between the gold price set by derivatives and supply and demand for the underlying good. The divergence strongly hints at price manipulation, of which the Chinese would have been the largest beneficiaries. China has $3.5 trillion in foreign exchange (of which at least 1.7 trillion denominated in USD) and is aware the US is forced to devalue their currency; evaporating China’s reserves. For this reason China has a strong incentive to diversify away from the USD into gold. Hence the enormous physical gold purchases in 2013.

In January 2013 USGS forecasted global mining production would be 2700 tons for the year, but due to the drop in the gold price this may turn out significantly lower as mines were forced to shut down.

A lot of the gold sold on the SGE was sourced via Hong Kong and Switzerland from the UK. The trade numbers from these countries from the last months haven’t been published yet, though in the first ten months of 2013 the UK has net exported 1199 tons (annualized 1439 tons) to Switzerland, Switzerland has net exported 779 tons (annualized 935 tons) to Hong Kong, and Hong Kong has net exported 957 tons (annualized 1148 tons) to the mainland. Hong Kong itself net imported 510 tons of gold over this period, annualized 612 tons. The UK’s primary seller was the world’s largest ETF holding GLD, whose inventory dropped by 551,7 tons.

2014 will be an exciting year; Chinese gold demand is not likely to slow down but supply is running dry. By the way, the rest of the world will also demand gold as all developed economies in recent years have been kept alive by the printing press, whereby the price mechanism is completely destroyed, a path of no return nor good outcome. Stretching the end of the global fiat experiment.

Gold’s direction will turn in 2014 resuming its bull-market (drive a new monetary order). It will be fascinating to see how this will play out as the floating supply is virtually gone."

US Dollar And Gold - PBOC Says No Longer in China’s Interest to Increase Reserves GLD, MUX, TNR.v, GDX

  

  We are following the groundbreaking changers coming out of China after The 3rd Plenum and PBOC drops another shell-bomb on the US Dollar today. We are witnessing the end of US Dollar as the Reserve Currency of Choice now. Who will be buying all these US Treasuries after that? How can FED Taper now? We can be assured about much higher interest rates with very far reaching implications for the economy and the U.S. fiscal budget.

  Timing of this release is very interesting - just yesterday Gold was killed after the release of FOMC minutes. We are entering the new dramatic stage of the Currency Wars, when China picks the old Austrian economics truth - strong currency means strong country. How long Gold Smashing can keep it down with COMEX running on fumes and record high leverage?

And another move by China is reported by ZeroHedge:

China Fires Shot Across Petrodollar Bow: Shanghai Futures Exchange May Price Crude Oil Futures In Yuan

FOMC Minutes Reveal Taper Likely In "Coming Months" - Almost Definitely In Coming Years. Gold Smashed For Conviction

Gold: PBOC to ‘Basically’ End Normal Yuan Intervention, Zhou Says GLD, MUX, TNR.v, GDX

  "Now we have a better insight into the recent record level Gold buying by China. Head of PBOC talks about currency flexibility and acceleration of yuan convertibility. All announced reforms target to jump start the new phase of Chinese economic growth with Internal Consumption becoming the main driver. In this situation stronger Yuan means stronger purchasing power in China, less US Treasuries buying (which is happening already) and higher commodity prices in US Dollar terms."

RJ Wilcox: China’s Central Bank Gold Reserves are Growing Rapidly GLD, MUX, TNR.v, GDX

"We are monitoring the situation with Gold demand from China as it is the main driver for the Gold market now. So far this demand has backed Gold to withstand the numerous attacks in the paper market to allow Janet Yellen to implement even more aggressive easing polices at the FED. 

  Rising Gold price indicates FIAT currency debasement, pushes real interests up, which economy and fiscal budget can not sustain at the moment. These official Gold holdings numbers are already out of date and the question is how much Gold China really already holds now and you can add to it the state level encouragement for citizens to accumulate Gold in China."

Bloomberg:

PBOC Says No Longer in China’s Interest to Increase Reserves

The People’s Bank of China said the country does not benefit any more from increases in its foreign-currency holdings, adding to signs policy makers will rein in dollar purchases that limit the yuan’s appreciation.

“It’s no longer in China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a deputy governor at the central bank, said in a speech organized by China Economists 50 Forum at Tsinghua University yesterday. The monetary authority will “basically” end normal intervention in the currency market and broaden the yuan’s daily trading range, Governor Zhou Xiaochuanwrote in an article in a guidebook explaining reforms outlined last week following a Communist Party meeting. Neither Yi nor Zhou gave a timeframe for any changes.

Enlarge image

Yi Gang, deputy governor of People’s Bank of China and head of the State Administration of Foreign Exchange, said in the speech that the appreciation of the yuan benefits more people in China than it hurts. Photographer: Brent Lewin/Bloomberg

5:00

Nov. 20 (Bloomberg) -- Robert Hormats, former U.S. undersecretary of state for economic growth, talks about the outlook for China's planned economic reforms and outlook for talks in Geneva between world powers and Iran over a nuclear deal. Hormats speaks with Tom Keene on Bloomberg Television's "Surveillance." Judd Gregg, chief executive officer of the Securities Industry and Financial Markets Association, also speaks. (Source: Bloomberg)

6:27

Nov. 19 (Bloomberg) -- Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong, talks about China's economy. He speaks with Rishaad Salamat on Bloomberg Television's "On the Move." (Source: Bloomberg)

5:35

Nov. 21 (Bloomberg) -- Simon Derrick, the London-based chief currency strategist at Bank of New York Mellon Corp., talks about global currency market imbalances and China's yuan policy. He speaks from Singapore with Angie Lau on Bloomberg Television's "First Up." (Source: Bloomberg)

7:07

Nov. 19 (Bloomberg) -- Pauline Loong, managing director at Asia-Analytica, talks about China's reform plan and the outlook for the nation's economy and financial system. She speaks with Angie Lau on Bloomberg Television's "First Up." (Source: Bloomberg)

China’s foreign-exchange reserves surged $166 billion in the third quarter to a record $3.66 trillion, more than triple those of any other country and bigger than the gross domestic product of Germany, Europe’s largest economy. The increase suggested money poured into the nation’s assets even as developing nations from Brazil to India saw an exit of capital because of concern the Federal Reserve will taper stimulus.

Yi, who is also head of the State Administration of Foreign Exchange, said in the speech that the yuan’s appreciation benefits more people in China than it hurts.

‘Less Interventionist’

His comments are “consistent with the plans to increase therenminbi’s flexibility so they become less interventionist,”Sacha Tihanyi, senior currency strategist at Scotiabank in Hong Kong, said by phone today. The central bank may widen the yuan’s trading band in “the coming few months,” he added.

The yuan’s spot rate is allowed to diverge a maximum 1 percent on either side of a daily reference rate set by the People’s Bank of China. The trading range was doubled in April 2012, after being expanded from 0.3 percent in May 2007. The band could be widened to 2 percent, Hong Kong Apple Daily reported today, citing an interview with the Hong Kong Monetary Authority’s former chief executive Joseph Yam.

Capital inflows into China accelerated in October, official data suggest. Yuan positions at the nation’s financial institutions accumulated from foreign-exchange purchases, a gauge of capital flows, climbed 441.6 billion yuan ($72 billion), the most since January.

About half of October’s increase in the positions was attributable to surpluses in trade and foreign direct investment, with the rest accounted for by inflows of “hot money,” Goldman Sachs Group Inc. Hong Kong-based analysts MK Tang and Li Cui wrote in a Nov. 18 note.

Stronger Yuan

The yuan has appreciated 2.3 percent against the greenback this year, the best-performance of 24 emerging-market currencies tracked by Bloomberg. Non-deliverable 12-month forwards rose 0.2 percent this week and reached 6.1430 per dollar on Nov. 20, matching an all-time high recorded on Oct. 16. The currency was little changed at 6.0932 as of 10:33 a.m. in Shanghai today.

“It appears that many in the People’s Bank think the time is about right to scale back currency interventions,” Mark Williams, London-based chief Asia economist at Capital Economics Ltd., wrote in an e-mail yesterday. “But China has got itself into a situation where stopping intervention will be very hard to do” and comments such as Yi’s will spur speculative inflows, he added.

Less intervention and smaller gains in foreign-exchange reserves may damp China’s appetite for U.S. government debt. The nation is the largest foreign creditor to the U.S. and its holdings of Treasuries increased by $25.7 billion, or 2 percent, to $1.294 trillion in September, the biggest gain since February. U.S. government securities lost 2.6 percent this year, according to the Bloomberg U.S. Treasury Bond Index. (BUSY)

Yi’s comments didn’t imply China will be cutting its holdings of U.S. government debt, said Scotiabank’s Tihanyi. “They are probably going to keep their allocations reasonably stable unless there’s a big policy shift, but it means they will possibly be buying less at the margin,” he said.

To contact Bloomberg News staff for this story: Xin Zhou in Beijing at xzhou68@bloomberg.net; Fion Li in Hong Kong at fli59@bloomberg.net"