Two Week Shanghai Gold Exchange Withdrawals Exceed All 2014 Comex Deliveries

The Shanghai Gold Exchange is the only major official physical gold trading market in the world.  All trades on the exchange are settled with the exchange of ownership on physical gold bullion.   Paper future contracts do not trade on the SGE.   In contrast, trading occurs on the LBMA and Comex in paper gold.  The Comex is de facto a 99.999% paper gold exchange for which the percentage metal backing the paper traded is minuscule.  The LBMA has been rapidly “catching up” to the Comex in this regard, although on a percentage basis the LBMA experiences a higher amount physical gold exchanged than the Comex.

Because of the way in which the SGE functions, gold withdrawn from the SGE measures the true demand for gold in China in a given time period.  All gold – except for the gold purchased by the Peoples Bank of China – purchased by any form of end user must pass through the SGE by law.  It is for this reason that “withdrawals” represent the most accurate measurement of demand for gold in China – except the Central Bank’s demand.

In the past two weeks, 106.1 tonnes of gold were withdrawn from the SGE.  As has observed:

Gold withdrawals on the Shanghai Gold Exchange the past two weeks were larger than the amount of gold delivered on COMEX during 2014 and greater than the amount of gold Germany has repatriated from the New York Fed since 2013.  LINK

I’ll point out one minor correction to the fact above:  it’s more gold than the U.S. Government has been able to repatriate back to Germany.

Year to date SGE withdrawals are 1,260 tonnes.  This translates into an approximate annualized run-rate of 2400 tonnes – with one of heaviest seasonal periods of Chinese gold demand still to come.

I find it fascinating how the entire world, including and especially the U.S. media, has summarily dismissed the unwillingness of the U.S. Government to return Germany’s gold. Recall, Germany originally asked for over 600 tonnes of gold to be returned.  This was after the Fed refused a request by a German delegation to inspect its gold (the Fed allowed the delegation into one of the nine vaults where the gold is supposedly being “safekept”).

If the gold is there and it belongs to Germany, why is the U.S. Government dragging it’s feet on this matter?   The question, of course, is highly rhetorical.  With China moving  more gold into the country and delivering to the entities who pay for this gold, transportation and delivery is not the issue.

At some point in the future, I have no idea when and neither does anyone else, there will be a massive upward explosion in the price of gold which is ignited by investors and Governments holding paper gold and who make move to take delivery of physical gold that no longer exists in the custodial vaults listed on their paper claims.

11 thoughts on “Two Week Shanghai Gold Exchange Withdrawals Exceed All 2014 Comex Deliveries

  1. Here is the hole in your thesis. The markets are centrally planned.
    The Chinese are trying to get reserve status for the yen and maybe
    by September the Chinese will achieve that goal. The dollar will
    remain THE reserve currency for sometime. As long as the B.I.S.
    can manipulate the gold price this entire process will be a slow burn.
    It really does not matter at this point how much gold is imported by
    China, India or Russia. The charts that you may say don’t matter
    actually do matter. As long as the majority of those on Wall Street
    trade and make trading decisions based on momentum which is
    based on charts and algorithms gold will go down or sideways.
    Basing price appreciation who’s buying or how much does not
    matter in centrally planned markets. It has been the same theme by
    every pro gold individual for the last four years. Gold will rise at some
    point but will not be driven by daily or weekly news. That’s just wishing
    hoping and praying and never works when buying or selling.

    1. How is that a “hole” in my thesis? I have stated several times – hundreds of times – the manipulation
      is SPECIFICALLY designed to direct the way the HFT algos perform. I don’t know how long you’ve been around
      but I observed starting in the late 1980’s/early 1990’s that Greenspan’s “verbiage” was designed to manipulate
      the directional trading of hedge funds. The development of computer systems during his reign enhanced it.

      It’s all based on the manipulation of the markets by the Central Banks – think of Exter’s pyramid and apply
      it to the manipulation scheme. Central Bank intervention is at the bottom.

  2. One good reason for the US to keep the German gold in the US-custody may be found in the Blessing letter. Karl Blessing gave to the German magazine “Der Spiegel” in 1971, in which he himself calls into question his earlier concessions – “I state to you now that I feel myself to be personally culpable in this matter. I should have been more rigorous with regard to the US. The dollars that we were accumulating should simply have been rigorously converted into gold.”

    He explained that, at the time, his fears of the foreign policy implications, which would have led to the withdrawal of American troops from Germany, had been one of the factors that led him to give in to US demands.

    And – as far as I remember the case I studied some years ago – probably the German gold may be stored in the US until the last US-soldier has left the German territory…

  3. Hegemony : is a geopolitical method of indirect imperial dominance, with which the hegemon (leader state) rules subordinate states.


    Developing & 3rd world countries very rich in Gold &/or Silver can be subordinated by depressing the price of monetary metals to the point where Gold &/or Silver mining is uneconomic, thus creating multiple conditions favorable for the hegemon (leader state) to exert indirect imperial dominance on multiple levels.

  4. Why aren’t the large Gold & Silver funds suing the Futures Exchanges? … it’s pretty clear the futures exchanges have morphed from producer hedging mechanisms to price control grids … if the large Gold & Silver funds aren’t going to sue the Futures Exchanges, I suggest the shareholders of these large Gold & Silver funds start suing Sprott, Hathway, etc. for their failures to properly disclose the risks in their prospectus documents.

    1. They have tried. They get shut down in either district or circuit court. It’s too expensive to take it all the way the SCOTUS – and it would be hopeless. Dude, the court system is just as rigged as everything else. Just ask W. He was thrust into the Oval office by a rigged court system.

      1. I just want to thank you for taking the time to dissect this Paper Gold/Silver trading and trying to shed some transparency on it’s more opaque inner workings … your doing one of the better jobs of it … you know what they say; Cockroaches hate the light.

  5. A couple of comments.

    1. Dave, Dave, Dave. The Chinese just announced their official Gold holdings have increased by a little over 600 tons. They wouldn’t lie would they ?

    2. GATA documented a case back around 2000 where a guy did try to sue the CME and the Exchanges for manipulating the Gold market. It went to Court and was immediately dismissed. The ESF ( Exchange Stabilization Fund ) gives the Banks the Legal authority to go in and ” protect the dollar ” in conjunction with the US Treasury. It’s not illegal to manipulate the markets according to the US Government. The fact that they’re looting and absolutely destroying the USA and most of the World’s Economies apparently doesn’t matter. Gold and Silver will continue to be manipulated until the day they can’t. Then my advise to all of you is….don’t get on the train. Whatever you do… don’t get on the train.

  6. Has anyone noticed the accelerating downtrend of the Shanghai Containerized Freight Index (SCFI)? As of Friday, 7-17-15 the Index was 593.20, down 72.82 from the previous week’s 666.02. That represents a 12% decrease in activity in only 7 days (in what is apparently a non-manipulated reporting series).

    The sub-indices show that the vast majority of this decrease is attributable to a dearth of freight forwarded to Europe and the U.S.

    My suspicion is that is that systemic collapse is occurring at an accelerating rate as proposed by various writers and confirmed by the SCFI, and that physical gold is in fact being hedge-hoarded by those that understand that a quick re-pricing will occur again just as it did in 1933 just after FDR’s monetary gold confiscation in the midst of depression – further separating the wealthy from the masses.

    The astute Chinese are amongst the hedge-hoarders preparing for that event at the lowest possible pricing while assisting in the manipulation of the masses in the U. S. and elsewhere to sell or not to purchase gold, thereby obviating the opportunity to secure as much of the available supply as possible.

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