Making Sense of Chinese Gold Flows and Gold Demand . PHILIP KLAPWIJK - - PowerPoint PPT Presentation

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Making Sense of Chinese Gold Flows and Gold Demand . PHILIP KLAPWIJK - - PowerPoint PPT Presentation

Feb 06, 2023 134 likes •337 views

Making Sense of Chinese Gold Flows and Gold Demand . PHILIP KLAPWIJK Managing Director, Precious Metals Insights Limited Bloomberg Intelligence and CME Group Precious Metals Forum London, 22 nd May 2015 www.preciousmetalsinsights.com 2 SGE

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Making Sense of Chinese Gold Flows and Gold Demand

.

PHILIP KLAPWIJK

Managing Director, Precious Metals Insights Limited Bloomberg Intelligence and CME Group Precious Metals Forum

London, 22nd May 2015

www.preciousmetalsinsights.com

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500 1000 1500 2000 2500

2010 2011 2012 2013 2014

Tonnes

SGE DELIVERIES & DEMAND* IN CHINA

SGE Deliveries Gold Demand

*Demand from private sector (jewellery fabrication, industrial fabrication, physical investment in bars & coins) Source: Metals Focus; Shanghai Gold Exchange

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SUPPLY

  • Mine Production
  • Scrap
  • Bullion Imports

DEMAND

  • Jewellery Fabrication
  • Industrial Fabrication
  • Physical Investment
  • Bullion Exports
  • Other Exports
  • ‘Financial Demand’
  • Official Sector Demand?

CHINA SUPPLY/DEMAND STRUCTURE

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CHINA MINE PRODUCTION & SCRAP SUPPLY

Source: Metals Focus

100 200 300 400 500 600

2010 2011 2012 2013 2014

Tonnes Mine production Scrap

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CHINA GOLD IMPORTS

*Hong Kong data refers to gross exports of bullion to mainland China Source: GTIS; Metals Focus; Precious Metals Insights

200 400 600 800 1000 1200 1400 1600 1800 2000

2010 2011 2012 2013 2014

Tonnes HONG KONG* DIRECT UNOFFICIAL OTHER

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CHINA DOMESTIC SUPPLY & GOLD BULLION IMPORTS

Source: GTIS; Metals Focus; Precious Metals Insights

500 1000 1500 2000 2500

2010 2011 2012 2013 2014

Tonnes DOMESTIC SUPPLY IMPORTS

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50 100 150 200 250 300 350 400

200 400 600 800 1000

2010 2011 2012 2013 2014

Tonnes JEWELLERY FABRICATION Yuan / gramme

LOCAL GOLD PRICE

JEWELLERY FABRICATION & LOCAL GOLD PRICE

Source: Metals Focus; Shanghai Gold Exchange

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CHINESE PHYSICAL INVESTMENT* & INDUSTRIAL FABRICATION DEMAND

*Private sector loco-China demand for bars, coins, GAPs Source: Metals Focus

100 200 300 400 500

2010 2011 2012 2013 2014

Tonnes PHYSICAL INVESTMENT INDUSTRIAL FABRICATION

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200 400 600 800 1000 1200 1400 1600

2010 2011 2012 2013 2014

Tonnes

CHINA GOLD DEMAND: METALS FOCUS & GFMS

METALS FOCUS GFMS Thomson Reuters

Source: Metals Focus (Fabrication plus Physical Investment); GFMS Thomson Reuters (Fabrication plus Bar + Coin Demand)

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500 1000 1500 2000 2500 3000

2010 2011 2012 2013 2014

Tonnes

GOLD DEMAND* & SUPPLY** IN CHINA

DEMAND SUPPLY

*Fabrication and investment demand (from the private sector); **Domestic supply from mines & scrap plus bullion imports Source: Metals Focus; Precious Metals Insights

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50 100 150 200 250 300

2009 2010 2011 2012 2013 2014

Chinese Exports of Gold Bullion* (tonnes) Hong Kong Others

CHINESE EXPORTS OF GOLD BULLION*

*Derived from bullion import data Source: GTIS; Precious Metals Insights

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100 200 300 400 500 600 700 800 900 1000 1100 1200

2009 2010 2011 2012 2013 2014

Chinese Exports of Gold* (tonnes) Bullion Jewellery Articles

CHINESE EXPORTS OF GOLD*

*Chinese Exports of Gold = Bullion and estimated gold content of Jewellery and Articles (latter two based on exports to HK only) Source: GTIS; Precious Metals Insights

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

09.Q1 09.Q3 10.Q1 10.Q3 11.Q1 11.Q3 12.Q1 12.Q3 13.Q1 13.Q3 14.Q1 14.Q3 15.Q1

Chinese Exports of Gold to Hong Kong (US$ Billions) Jewellery Articles 1 Articles 2

CHINESE EXPORTS OF GOLD TO HONG KONG

Source: GTIS; Precious Metals Insights

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TOTAL SOCIAL FINANCING IN CHINA

Source: Deloitte

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GOLD LOANS VOLUME IN CHINA

Source: Shanghai Gold Exchange; Precious Metals Insights

300 600 900 1200 1500 1800

2010 2011 2012 2013 2014 (estimated)

Tonnes Gold Lending (end year)

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CHINA OFFICIAL MONETARY GOLD RESERVES

10 20 30 40 50 60 200 400 600 800 1000 1200

1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

US$ Billion Tonnes

Value of Gold Reserves

Source: IMF; Precious Metals Insights

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0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000

Gold’s share in % Forex reserves in US$ billions

CHINA FOREX RESERVES & GOLD’S SHARE OF TOTAL RESERVES

Gold’s Share of Total Reserves Foreign Exchange Reserves

Source: IMF; Precious Metals Insights

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  • Supply of gold to the Chinese market (whether measured by an independent supply calculation
  • r SGE deliveries) exceeds demand (defined as jewellery, industrial & investment) by a wide

margin, especially in 2013 and 2014.

  • It is most improbable that demand (defined as jewellery, industrial & investment) is currently

being undercounted.

  • The ‘surplus’ in the Chinese gold market is being absorbed by several ‘non-standard’ sources
  • f demand from the private sector. Some of these overlap and can give rise to double
  • counting. Moreover, the (only partial) data available on these ‘non-standard’ sources of

demand needs to be carefully interpreted and not simply taken at face value!

  • It is possible that official sector purchases in the domestic market (directly or indirectly) may

account for part of the apparent China gold market ‘surplus’ in recent years.

  • A substantial quantity of gold has been relocated from the West to China as a result not only of

‘genuine’ demand growth but also because of the explosion in ‘non-standard’ demand.

  • A major policy or market driven unwinding of the ‘non-standard’ demand would probably result

in China trading at a considerable discount to the international market. The impact of such a development on the global gold price level (as opposed to premium/discount) is less clear cut.

CONCLUSIONS

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DISCLAIMER

The information and opinions contained in this presentation have been obtained from sources believed to be reliable, but no representation, guarantee, condition

  • r warranty, express or implied, is made that such information is accurate or

complete and it should not be relied upon as such. Accordingly, Precious Metals Insights Limited accepts no liability whatsoever to the people or organizations attending this presentation, or to any third party, in connection with the information contained in, or any opinion set out or inferred or implied in, this presentation. This presentation does not purport to make any recommendation or provide investment advice to the effect that any gold, silver, platinum or palladium related transaction is appropriate for all investment objectives, financial situations or particular needs. Prior to making any investment decisions investors should seek advice from their advisers on whether any part of this presentation is appropriate to their specific

  • circumstances. This presentation is not, and should not be construed as, an offer
  • r solicitation to buy or sell gold, silver, platinum or palladium or any gold, silver,

platinum or palladium related products. Expressions of opinion are those of Precious Metals Insights Limited only and are subject to change without notice.