Tuesday, October 13, 2015

How Much Gold Is China Importing And Does It Still Correlates to SGE Withdrawals?

"We have some catching up to do in terms of discussing Chinese gold import in H1 2015 and how this relates to withdrawals from Shanghai Gold Exchange (SGE) vaults. For this post it’s advised you’ve read The Mechanics Of The Chinese Domestic Gold Market to have a basic understanding of the physical gold supply and demand flows through the Shanghai Gold Exchange within the Chinese domestic gold market.
SGE withdrawals in 2015 are stronger than ever. Although, SGE withdrawals are (seemingly) less correlated to Chinese gold import this year, nonetheless Chinese gold import in the first six months of 2015 was higher relative to the same periods in the years before. 

Chinese Gold Market Recap

started reporting on SGE withdrawals in 2013 because I noticed these numbers exactly equaled Chinese gold demand as disclosed in the China Gold Association (CGA) Yearbooks 2007 until 2011. In addition, the structure of the Chinese gold market appeared to be designed to direct all Chinese gold supply through the SGE. Therefor, what comes out of the SGE (withdrawals) must equal total supply, which must equal total (wholesale) demand.
SGE withdrawals equal domestic mine output plus recycled gold supply plus import. Therefor, by using withdrawal data from the SGE, Chinese domestic mine output figures from the CGA and estimate the amount of recycled gold supply, we could calculate import.
Mine + recycled gold + import = SGE withdrawals
Import = SGE withdrawals – mine – recycled gold
SGE withdrawals proved to be a very effective tool to estimate import figures and measure Chinese wholesale gold demand. That is, until the Chinese gold market changed. In 2014 the Shanghai International Gold Exchange (SGEI) opened its doors, potentially inflating SGE withdrawals from the Shanghai Free Trade Zone without this gold ending up in the Chinese domestic gold market, and recycled gold supply increased significantly relative to 2013. From late 2014 I started writing SGE withdrawals were more difficult to analyze because of these changes in the Chinese gold market. After a period of abstinence from my side in reporting on SGE withdrawals, in this article we will resume to analyze the physical supply and demand flows in the Chinese domestic gold market.
The challenge is that China does not disclose gold import data in its regular customs reports. To find out how much China is importing we must use the foreign trade data statistics from all countries that export to China. A few years ago the bulk of Chinese gold import came in through Hong Kong and so gold export data from the Hong Kong Census and Statistics Department roughly elucidated how much China was towing in. Currently, China is importing gold directly from many other countries. To grasp how much gold China is importing I’ve started to chase the foreign trade statistics from all the major gold hubs (UK, US, Switzerland, Singapore, Hong Kong, Turkey, Dubai) and the big miners (Russia, South Africa, Ghana, Australia, Brazil, Canada, Mexico, Peru, Uzbekistan). Unfortunately this study is taking far longer than I was hoping for – in some countries the customs representatives, when finally contacted, are very sluggish in replying to my emails. I will share the data I have collected so far..."
at https://www.bullionstar.com/blogs/koos-jansen/how-much-gold-is-china-importing-and-does-it-still-correlates-to-sge-withdrawals/

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