LAWRIE WILLIAMS: World No. 2 producer Q1 gold exports to China huge new record

We have frequently commented on Chinese gold imports alone comfortably exceeding the calculated figures for China’s consumption from the major precious metals analytical consultancies like Metals Focus (which also provides data to the World Gold Council (WGC) for its analyses) and GFMS, both of which use some limited parameters for their figures.  We look at the imports as being an integral part of Chinese gold flows – and China’s own gold production as the world’s No. 1 also needs to be added in.  In total known gold imports into the Chinese mainland from countries/entities which announce their gold export figures to China (Hong Kong, Switzerland, the UK, the USA, Australia etc.) plus China’s own gold output, which doesn’t leave the country, probably amounts to well over 1,500 tonnes on an annual basis – as compared with the Metals Focus/WGC/ GFMS Chinese gold consumption figures which usually come in at around 1,000 tonnes or lower.  There will also be supplies from scrapped jewellery and gold artefacts which will put Chinese gold ‘absorption’ at nearer 2,000 tonnes than the ca. 1,000 tonnes claimed as the nation’s annual consumption.

Indian calculated consumption also comes in at near the 1,000 tonne level, which sometimes leads to the media picking up, from the WGC Gold Demand Trends figures, that India may be the world’s largest consumer of gold – it could happen again this half year with Indian H1 gold import levels having recovered hugely from their 2016 lows.  Under the limited parameters used by the consultancies India could indeed be seen as the World’s No 1 consumer in the most recent half year period, but in terms of gold flows and gold absorption it is still way behind China.

The latest figure for Q1 gold exports to Hong Kong and China (they are not broken down individually, but most gold going into Hong Kong eventually finds its way into mainland China) from the world’s second largest gold producer (Australia) published by Steve St Angelo in his SRSrocco report support the very high Chinese gold import figures and certainly adds to speculation that China is again surreptitiously building its gold reserves despite reporting zero increases on a month-by-month basis to the IMF.  Q1 gold exports from Australia to China came in at a massive 57.4 tonnes – comfortably a big new record quarterly export figure, and around 80% of Australian gold production for the quarter (See: Australia's Q1 gold output down on Q4 2016 but....).  St Angelo speculates that this indicates China’s determined move to set the stage for a new Gold-Backed Currency or Trade, perhaps in conjunction with Russia which is openly adding to its gold reserves – Russia’s latest monthly gold reserve position is due to be announced today. 

St Angelo also points to the interesting statistic that the USA is also exporting a substantial amount of gold to Hong Kong and China this year – 63.3 tonnes in Q1 which is equivalent to more than the country’s total new mined gold output over the period.  Indeed he points out that total US gold exports have recently been exceeding national production by 100% or more which confirms the huge gold flow figures away from the West we often point to.  While not all this gold is going directly to Hong Kong and China, an important proportion of the balance will be – via nations like Switzerland and the UK and most of what isn’t going into greater China will be going into India.  See our regular coverage of Swiss gold exports the latest of which is linked here

So gold is continuing to flow strongly into China/Hong Kong – and India too.  One wonders how long this can be maintained before a shortage of physical metal develops in the West.  There are some indications that this may already be occurring. But so far this has not been accounted for in the metal price which continues to be controlled by paper gold transactions in the Western futures markets.  We don’t see this continuing indefinitely, but when the tipping point will come remains obscure.

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20 Jul 2017

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London - recently described as the World’s No. 2 University (after MIT).

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