China’s Demand For Gold Is Accelerating

Our fund subscribes to a specialized gold market report published by John Brimelow (JB’s Gold Jottings).  He covers in-depth data on a thrice-daily basis from all of the major gold trading regions of the world.   In the past 4-5 months, both deliveries and withdrawals from the Shanghai Gold Exchange have increased roughly 20% per day vs. the historical levels.

For the record, the Chinese Government requires that all of the gold that is distributed and purchased by end users in China must pass through the Shanghai Gold Exchange –  except any gold purchase by the Peoples Bank of China (China’s Central Bank).  In other words, if deliveries and withdrawals to and from the SGE have increased like this over the past half year, it means that China’s demand for physically delivered gold – as opposed to the fraudulent paper gold preferred by west (GLD, Comex futures, LMBA forwards, paper gold bank investment accounts, etc) – is accelerating.

Frank Holmes wrote an article for the Daily Reckoning wrote an article describing this dynamic:   China’s Love Gold:  You Ain’t Seen Nothing Yet.   One can only wonder what China intends to do with all this gold…(I think I know).

15 thoughts on “China’s Demand For Gold Is Accelerating

  1. Strategically the PBOC is adding and encouraging its people to buy.

    If Apple is making gold iwatches (which I have a hard time seeing huge volume after the initial buying spree) perhaps “some” of the gold going thru SGE is for that?

    since Apple has a lot of cash outside the US it would be something else if Apple was putting its fiat cash in gold cash.

    who knows–info is hard to come by from china and now just as hard to come by from US of A.

  2. There is so much to comment on here. Apple has more money than the US Treasury. They have to know what we know. They don’t pay taxes and are cash rich. They buy back their own stock and get even richer. Now what to do with the cash ? I’m trying to get a handle on the iWatch thing. Two ounces of Gold is going to make for a mighty expensive watch. But it certainly gives Apple and the Treasury cover to go out and buy a boat load of Gold. The Gov’t turns to Apple and changes the Laws and says you owe us “X”. Apple says OK, here’s the Gold. I don’t know. Just beating things around in my head. But I do have a contact within Apple so I have asked for the spec’s and any info he may have. If I get anything I’ll let you know.

  3. When will you figure out that China news is meaningless. The price of gold is not determined by where gold is shuffled off to.

    I will let you in on a secret China demand rising equals LOWER gold prices. Why because the URGENCY of PAPER gold sellers is greater. SUPPLY = DEMAND at the current price. Wow I know that without being a Wall Street sharpie!

    But wait! The price is MANIPULATED from $20 in 1910 to $1900 in 2011 and back down to $sub $1,200.

    Why don’t you go read tsi-blog.com or acting-man.com and get an education!

    1. Your commentary makes no sense. I do read acting-man and, while I think Pater Tannenbaum has some good insights, there are holes in his analysis with respect to the real estate market and the precious metals market. As for TSI, he claims gold was making lower highs and lower lows thru 2002. That is wrong. gold started making higher highs and higher lows in late 2000. How do I know? Because I was trading the gold market almost exclusively back then. I have gold 1 oz. philharmonics in my closet that have a below $300/oz price basis.

      I think maybe you’ll have more fun trolling on Robert Prechter’s website. He’s the guy who predicted that gold would go back to $50 in 2003 about 2 or 3 months before gold shot up through $400…

      1. I am not a troll but pointing out flaws in your analysis. Isn’t that the purpose of comments sections?

        I am BULLISH gold because of the inevitable failure of fiat money and central planning but my time frame is in decades.

        But it is a fact that SUPPLY = Demand at a price. Agreed?
        Therefore If a producer or institution wanted to sell 10,000 tons today in an hour, the SUPPLY of gold would rise 10,000 tons traded (ignoring other sellers) and the DEMAND would rise 10,000 tons–but the price might have to decline $200 to ACCOMMODATE the sellers TODAY. If someone offered gold to me today at $800 per oz US Dollars, I would raise my reservation demand and buy because of the PRICE.

        If the price is rising, then bids are rising and vice-versa.

        If China takes the 10,000 tons at $300 lower–good for them, but the price TODAY declines.

        1. I think a more important discussion TO LEARN is WHY–if global debt is rising, interest rates at 0 or negative, and growth a pittance–is the dollar rising relative to other currencies. Why isn’t gold back above $2,000, why are stocks making highs.

          Understanding the economic fundamentals behind deflation–contracting credit would be a start.

          1. If you read my blog, I have answers to a lot of that. The dollar is rising only against the basket of currencies in the dollar index (euro, yen, pound, loonie, swissy, swedish krona). It’s been down vs. yuan and was flat vs. gold in 2014.

            The dollar is in a massive short squeeze fueled by collapsing debtor nations scrambling for dollar to pay back their dollar denominated debt. There’s also a very big short squeeze going on in Treauries which places a high demand on dollars needed to pay to cover the securities on-call. There’s many other technical reasons. All artificially induced.

            You think U.S. mulitnationals are happy about the rising dollar? ROFLMAO

          2. @JC.
            “But it is a fact that SUPPLY = Demand at a price. Agreed?”
            “Why not at 2000”

            Yes, but the critical question is demand for WHAT sort of gold.
            The gold price is mainly set in the futures market, by “paper gold” with volumes exceeding many many many times the inventories of physical gold of these exchanges (mainly LBMA/CONeX), while the eastern exchanges gobble up the actual thing as long as it is supplied from the west at these bargain sale “prices”. These exchanges are dominated by the big banks, which are putting in orders on behalf of CBs. Good luck trying to bet against a CB with unlimited funds in a paper game… HAHAHA… So there is your “Why” and “How”.

            Now if that resembles a normal, healthy and sustainable market to you, then good for you…

            The east knows this all too well and gobbles up just so much as not to blow up the system… They could kill the system anytime, any minute they like. Think China coming in with say 1T $ and buy all the fizz and then some… Or they say, we’ll buy fizz at the previous ATH price which would be a +500 million ounces or just around 10% of all the physical gold ever mined… for just 1 T, which of course they will never do. The death by 1000 cuts is the the smarter and better way for them, and they cannot be blamed after the fact.

  4. Foreign investment crackdown: Chinese billionaire Hui Ka Yan’s purchase of Point Piper mansion is ‘illegal’

    Treasurer Joe Hockey yesterday gave the company owned by 55-year-old Hong Kong property developer Hui Ka Yan, 90 days to sell the Point Piper mansion or face having it repossessed by the Commonwealth Department of Public Prosecutions.

    Forbes lists Dr Hui as the 15th wealthiest person in China.

    The divestment order is the first legal notice handed out in six years under foreign investment rules governing residential property.

    But Treasurer Joe Hockey warned there were more to come, following last week’s ­announcement that the government planned to increase penalties for illegal foreign purchases, and impose fees on the legal purchase of new dwellings by foreigners.

    http://www.dailytelegraph.com.au/news/nsw/foreign-investment-crackdown-chinese-billionaire-hui-ka-yans-purchase-of-point-piper-mansion-is-illegal/story-fni0cx12-1227247018678

    hmmm…..

  5. Just my 2¢ (or more)

    China wants the Renminbi to be the new world reserve currency, but China only wants this to happen when China is ready for it and not a moment sooner. In order to do this, the Renminbi must be backed by gold to gain acceptance throughout the world, especially in parts of the world where gold is, has always been and always will be money.
    The US boasts it has (supposedly) 8000 tons of gold, China wants a large tonnage of gold to give the impression that the Renminbi, unlike the US Dollar, is backed by gold, has low government debt and that China’s Renminbi is economically strong.

    Now we look at the price of gold, it is stuck in the $1200 range, are the leaders in China unhappy about this? Are the average people in China sad about this? Heck no! This gold price is like manna to them, a gift from heaven for them to exchange their paper holdings, which are losing value due to inflation, for real wealth, namely real gold. China could shut down the CRIMEX by buying all their gold in one fell swoop and demand delivery, but why kill the golden goose? Let the manipulators screw around with the price all the while China buys gold at bargain basement prices, and pick up gold mines for its own gold consumption along the way. China can crash CRIMEX when it is most convenient for China (and most painful to the US) when they see fit, or use the threat of crashing CRIMEX to get the US to see things China’s way (its not always about gold, its about power and control that gold grants its owner.)

    China honors its past and learns from its past, especially China’s past and bitter experience with unbacked paper fiat money. China issued the first paper money and China also suffered from the first hyperinflation caused by paper money. China learns its lessons unlike most in the west.

    China is playing the long game, waiting and biding its time before kicking king dollar off its throne, whether it takes a decade or two, China has the patience to wait. China patiently waited for Hong Kong to be returned to it, it can wait for the day that the Renminbi is the global reserve currency of the planet.

    China knows full well that the US is like a drunken cowboy with two loaded six shooters ready to blast away at anyone who is a threat, real or imagined. China is waiting for the day when the Yankee Cowboy is either too drunk and helpless to cause any more trouble and can be disarmed easily, or he has emptied both six shooters and doesn’t have the money to buy ammunition. One way or another China gets the last laugh while selling Uncle Sam more than enough rope to hang himself, and won’t the Chinese have a good laugh if the rope sold to the US was originally made in the US but the American rope company moved to China to lower its costs.

    Sorry for the long post, Dave, I love your site. I would buy your stock reports but I closed my brokerage account back in 2008 and gave up on stocks after the near meltdown, I’m once bitten twice shy I guess. I would send you a donation via a money order if you gave me a mailing address or PO box.

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