I don't know what regulations are in place here, but if dealers in Hong Kong are able to take delivery from the SGE, it could be (at least partially) related to physical/retail demand from tourists (Indians, etc.) in Hong Kong.
http://www.zerohedge.com/contributed/2013-07-12/shanghai-gold-silver-volumes-surge-records-and-premiums-rise-night-trading-bePremiums on gold futures on the SGE yesterday closed at a $12.90 per ounce over COMEX spot - COMEX at $1,283.30/oz and SGE at $1,296.30/oz. Overnight the premium on the SGE rose sharply and is now at $35.94 - COMEX at $1,275.30 and SGE at $1,311.14/oz (see ‘Gold Futures’ in tablebelow).
http://www.reuters.com/article/2013/07/12/china-gold-futures-idUSL4N0FI0ZE20130712Trading volumes for gold and silver on the Shanghai Futures
Exchange (ShFE) jumped to record highs today a week after the bourse
launched after-hours trading, driven by a surge in investment and
http://www.reuters.com/article/2013/07/12/china-goldpremiums-idUSL4N0FI2FF20130712"They say the whole summer will be like this. If you ask the refineries, they say they can deliver only after two months," said one Hong Kong-based dealer.
Another trader said the full impact of the shutdowns will be felt in August, when demand tends to pick up ahead of the wedding season in September.
"The current gold supply is getting increasingly constrained while the demand remains strong," said Albert Cheng, managing director for the Far East region of the World Gold Council.
Cheng said gold jewellery factories in China are working at high levels of capacity and 24-hour shifts to meet the demand.
Scrap supply is also expected to fall this quarter as lower prices prevent customers from selling their old jewellery.
More on the SGE:The chart below shows the Shanghai monthly physical deliveries vs monthly world gold mining supply.
In the last two months, Chinese demand for physical delivery all by itself is nearly equal to total worldwide gold production. Couple that with the graphs we have seen showing miners are loosing money at the current spot price of gold. Some has to give, and that something is the price of gold, upward.
Friday, July 19, 2013
David Baker and David Franklin
The Shanghai Gold Surprise
The physical gold market continues to develop in the most wonderfully counterintuitive way. While the paper gold price languishes below US$1,300 per ounce, physical demand out of China is now reaching previously unforeseen levels. If you’ve heard this story before, it’s more of the same, except that the demand tonnage is now so high as to be almost comical.
According to data released by the Shanghai Gold Exchange, the amount of gold contracts settled for physical delivery on its exchange reached a staggering 1,098 metric tonnes year-to-date as of the end of June.1 This is an astoundingly large amount of physical gold. For perspective, 1,098 tonnes represents approximately 40% of the entire estimated global gold mine production in 2013. It also represents roughly 1/8th of the US Treasury’s official gold reserves, and over 100% of China’s stated official gold reserves. If the rate of physical delivery on the Shanghai Gold Exchange continues at current levels, it will deliver the equivalent of over 100% of global mine production by the end of this year… all through one exchange.
In contrast, the COMEX futures exchange in New York, where the bulk of US gold futures are traded, saw a measly 160.7 tonnes of physical delivery requests over the same period (year-to-date to June).2 Although the paper volume on the COMEX dwarfs that of the Shanghai Gold Exchange, the level of physical delivery requests is only 15% of that seen in Shanghai.
If the Shanghai data is true, when combined with the gold imports going into China via Hong Kong, we now have a situation where China is buying the equivalent of all global gold mine production produced on a monthly basis. How that can coincide with a gold price drop of US$400 per ounce over Q2 is beyond our capability to explain, but it does mean that China is now the undisputed hub for physical gold.
Interestingly, China’s demand for physical gold does not seem to be benefitting the growth of gold ETF products within the country. Bloomberg recently reported that China’s first two exchange-traded funds backed by bullion both had disappointing debuts, with Huaan Asset Management Co. reportedly raising only $195 million out of an expected $400 million at launch.3 Although the press has naturally concluded that this news indicates waning gold demand in China, we can’t help but think it shows that China’s gold interest is primarily focused on the physical metal, as opposed to financial products that trade on exchange. Certainly if the time ever comes where the physical gold market sets price discovery for the gold price (as opposed to the futures market) it seems highly likely that the first place that will happen now is within Shanghai itself.
Whether there’s a link between China’s increasing physical gold deliveries and the drop in gold inventories within the COMEX and GLD ETF remains to be seen, but whoever is supplying China’s gold appetite is supplying it in size. Despite gold’s lackluster price performance, these developments strongly suggest we could be in for an interesting summer in the weeks ahead. Gold is a finite resource - if China’s current purchase rates continue, it is going to own a significantly large proportion of global gold reserves.
The other major source of supply is gold recycling, which is a significant amount per year. Chart from World Gold Council report, 2012:presumably some of the gold traded is simply being churned, otherwise selling more than is produced and delivering is a bit of a challenge ?
Sure enough, and it can be seen in the Q1 and Q2 reports by the World Gold Council. ETFs have been net buyers of gold since early 2000 (see table below), but in Q1 and Q2 of 2013, they have been dumping physical into the market (see chart below):Speculation is/was that the draining of COMEX/LBMA/GLD stocks were going to support/supply SGE sales.
http://www.ingoldwetrust.ch/shanghai-gold-exchange-international-board-another-blow-to-us-dollar... in the fourth quarter of this year the Shanghai Gold Exchange (SGE) will launch an international board in the Shanghai Free Trade Zone (FTZ) for investors worldwide to trade gold spot contracts denominated in renminbi. The purpose being is becoming not only the world’s primary physical gold market but also increase pricing power and internationalize the renminbi.
The SGE international board will be another blow to the US dollar hegemony, as more people around the world will hold renminbi, use the renminbi for trading gold and China will have more power in pricing gold, though the international board’s pricing power can only be wholly exploited when the renminbi is fully convertible.
https://www.bullionstar.com/article...1094 mt ytd silver premiums make record highs...
The SGE silver premium, measured by Ag(T+D), is back on the rise. Closing nearly at 6 % on August 1. I manually calculated the premium for Ag(T+D) on the close at August 8; it was 7.4%. As we can see from the chart below that is a year to date record.
Today the Chinese government backed Shanghai Gold Exchange (SGE) brought forward the launch date of its international gold trading platform which is hosted in the city’s free trade zone (FTZ). The gold trading platform will be known as the ‘international board’.
In a surprise announcement, the SGE said today that the international board will go-live this Thursday September 18, eleven days ahead of its original launch date of Monday September 29.
Forty members of the Exchange including global banks UBS, Goldman Sachs, HSBC and Standard Chartered, will participate in gold trading on the SGE’s international board, trading 11 yuan denominated physical gold contracts including the large 12.5 kg (400 oz) bar, the ever popular 1 kg bar and a 100 gram contract.
The location of the SGE international board in the Shanghai free trade zone is symbolic in that this location has been earmarked by the Chinese government as part of financial sector internationalisation strategy.
The SGE is also opening a precious metals vaulting facility in the free trade zone with a 1,000 tonne capacity limit.
Koos Jansen: China stops publishing Shanghai exchange's gold withdrawals
Submitted by cpowell on Tue, 2016-01-26 20:40. Section: Daily Dispatches
3:38p ET Tuesday, January 26, 2016
Dear Friend of GATA and Gold:
Gold researcher and GATA consultant Koos Jansen today confirmed with the Shanghai Gold Exchange that it has discontinued publishing the weekly total of gold withdrawals from the exchange.
"This is a disaster for the gold community," Jansen writes. "Shanghai Gold Exchange withdrawals provided a unique transparent metric for Chinese gold demand, and it's gone. However, that the Chinese stopped publishing SGE withdrawals strongly confirms the importance of these numbers from the past. Until December these numbers gave us a direct measure of Chinese wholesale gold demand. The truth became a little uncomfortable for the Chinese."
Jansen understates the situation. China's decision to conceal the Shanghai gold withdrawal data confirms the monetary metal's supreme significance in the world financial system as it is and as it is likely to evolve. If gold wasn't becoming even more important and strategic, China would not start concealing its flow.
Jansen's report is headlined "China Stops Publishing SGE Withdrawal Figures" and it's posted at Bullion Star here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.