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China's President Confirms Practice Of Moving Official Reserve Assets To Other Entities In China

By Louis Cammarosano of Smaulgld

  • Shanghai Gold Exchange withdrawals were 65.681 tonnes of gold during the week ended September 25, 2015.
  • Total gold withdrawals on the Shanghai Gold Exchange year to date are 1,958 tonnes.
  • Withdrawals on the Shanghai Gold Exchange are running 37.2% higher than last year and 17.88% higher than 2013’s record withdrawals.
  • Hong Kong gold kilobar withdrawals pass 565 tonnes in 2015.
  • Chinese President Xi Jinping admits “some assets in foreign exchanges were transferred from the central bank to domestic banks, enterprises and individuals”

Shanghai Gold Exchange

The Shanghai Gold Exchange (SGE) delivered 65.681 tonnes of gold during the week ended September 25,2015. During prior trading week ended September 18 2015, the SGE withdrawals were 63.22 tonnes of gold.

The two week total of withdrawals is 128.90 tonnes of gold and the year to date total is 1,958 tonnes, for an annualized run rate of approximately 2,650 tonnes.

Shanghai Gold Exchange vs. Global Mining Production

Total global gold mining production in 2014 was 2,608* tonnes. The volume of gold withdrawn on the Shanghai Gold Exchange this year is pacing to be about 2,650 tonnes or roughly equivalent to the total global mining production of last year. This leaves little or no mining supply to satisfy global gold demand in India (expected 2015 gold demand of about 1,000 tonnes) and the rest of the world.

Shanghai Gold Exchange and HongKong Kilo Bar Withdrawls vs. Global Mining Production

Through September 25 2015, Shanghai Gold Exchange withdrawals are 1958 tonnes and through September 30, 2015 Hong Kong Kilo bar withdrawals (see below) are 565 tons.

Combined year to date the withdrawals on both exchanges are 2,523 tonnes through the first nine months of 2015. Modest projections could take the combined gold withdrawals from Hong Kong Kilo bars and the Shanghai Gold Exchange to 2,900 tonnes in 2015.

Shanghai Gold Exchange Withdrawals vs. Comex Deliveries

In “Silver and Gold Short and Long Positions on Comex” we noted:

Comex is a place where banks trade gold and silver they don’t have to banks who buy gold and silver they don’t want.

These following two charts illustrate the point:

Two Week Withdrawals on the Shanghai Gold Exchange in September 2015 vs. Comex 2014

Withdrawals on the Shanghai Gold Exchange were 137 tonnes during the two week period ended September 18, 2015, compared to just 85 tonnes delivered in all of 2014 on Comex.

Shangahai Gold Exchange Withdrawals vs Comex Deliveries of Gold 2008-2015

The chart illustrates that paper market vs. physical market natures of the Comex and Shanghai Gold Exchanges.

China is becoming the center of the Asian gold world. A $16 billion China Gold Fund was announced in May and the Shanghai Gold Exchange continues to establish itself as viable competitor to the gold trading centers in London and Chicago. China’s gold imports, trading and mining production are one of the cornerstones of China’s de-dollarization/Yuan strengthening initiatives that focuses no so much on selling U.S. Treasuries but creating alternative financial systems like the Asian Infrastrucure Investment Bank.

China is widely believed to be making a play for inclusion in the International Monetary Fund’s (IMF) Special Drawing Rights (SDRs) Program later this year. If China fails to gain inclusion in the SDR, its recent initiatives to strengthen its currency and gain greater acceptance of the Yuan may provide a strong alternative to the IMF regime.

China Updates its Gold Holdings

China recently announced their first update to their official gold holdings since 2009. The People’s Bank of China announced that their gold holdings had climbed from 1054 tons to 1658 tons, making China the fifth largest gold holding nation in the world.
China chose to incude six years worth of gold accumulation (over 600 tons) all in the month of June.

Last month China reported that they added 19.3 tons (610,000 ounces) of gold to their reserves in July bringing their total to 1,677 tons (53.93 million ounces). Earlier this month the PBOC updated their August gold reserves, indicating that they had added 16 tonnes of gold to their reserves, bringing their total to over 1693 tonnes.

Chinese gold reserves grew by 16 tonnes in August.

China’s recent update to its gold holdings put it in fifth place among gold holding nations.

Many suspect that China has far more gold than they have reported. Click here for an explanation on where China’s gold might be.

Chinese President Xi Jinping recently confirmed the practice of moving the People’s Bank of China’s reserve assets to other entities in China: “some assets in foreign exchanges were transferred from the central bank to domestic banks, enterprises and individuals” This might explain where some of China’s gold hoard, that many suspect they posses but have not reported as reserves, may be located.

* * *

How does all that gold get to China?

The Bank of China also recently joined the auction process at the London Bullion Market Association where the price of gold is determined.

In addition, the Chicago Mercantile Exchange futures contract for Hong Kong Kilobars has experienced withdrawls of an average of more than five tons of gold a day since it began in mid March earlier this year. As of September 30, 2015, over 535 tonnes of gold have been withdrawn pursuant to this program since March 2015 for an annualized run rate over 1,200 tonnes of gold a year.

COMEX Hong Kong Gold Kilobar Withdrawals Through September 30, 2015

Comex Hong Kong gold kilo bar withdrawals have passed 565 tonnes since March 2015 and passed 18 tonnes on three trading days in September.

The Bank of China also recently joined the auction process at the London Bullion Market Association where the price of gold is determined.

China is the world’s largest gold producer:

 

China is the world’s largest gold producer with mining production over 2,000 tons the past five years. China has mined 228.7 tons of gold during the first six month of 2015.

Volume of Gold Withdrawals on the Shanghai Gold Exchange

Shanghai Gold Exchange Withdrawals for the week ended September 25, 2015, were over 65 tonnes.

The volume of withdrawals of gold on the Shanghai Gold Exchange as of September 25, 2015, is running 37.2% higher than 2014 during the same period and 17.9% higher than 2013’s record pace.

Withdrawals of gold as of September 25, 2015, on the Shanghai Gold Exchange are running 37% higher than last year and 18% higher than the record pace set in 2013.

In addition to the vibrant Shanghai Gold Exchange and increasing world leading gold mining production, China is also the world’s largest gold importer. Here is a chart showing the volumes of gold traded on the Shanghai Gold Exchange vs. gold imported through Hong Kong as of July 2015.

China also imports unreported amounts of gold through Shanghai.

* * *

All charts, other than those labeled “Smaulgld”, courtesy of Nick Laird.
*Gold Mining Production Source:2014 Gold Year Book published by CPM Group. There are various estimates of global gold mining production ranging from 2,600 tons to 3100 metric tons.
Shanghai Gold Exchange Data source GoldMinerPulse