Shanghai Silver Backwardation Ends, Premiums Down

Shanghai Gold Exchange withdrawals 2014 week 23Chinese gold demand in the past few weeks is not as strong as in the beginning of 2014 or as in 2013 after the price of gold crashed in April, though the levels are slightly higher as they were throughout 2011 and 2012.
On the Shanghai Futures Exchange (SHFE) all silver futures contracts came out of backwardation this past week (week 24), and on June 13, most Shanghai silver premiums over international price closed under 6 %.
The prior week they all closed above 6 %.

The scarcity of silver in Shanghai appears to be easing.

 

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Submitted by Koos Jansen, In Gold We Trust:

Chinese gold demand came down in week 23 (June 3 -6) to 27 metric tonnes, from 35.7 tonnes in week 22.
Note, SGE trading week 23 was only four days.

 

 

Shanghai Gold Exchange withdrawals only 2014 week 23

 

 

Chinese gold demand in the past few weeks, measured by SGE withdrawals, is not as strong as in the beginning of 2014 or as in 2013 after the price of gold crashed in April, though the levels are slightly higher as they were throughout 2011 and 2012.  See the weekly withdrawals chart 2009-2014 below. We can see high withdrawal numbers around every December and January, and from April 2013 to November 2013.   The peaks around new year are higher every year and so are the periods in between those peaks, except this year’s withdrawals aren’t higher than in 2013, but are relative to 2012.

 

 

Shanghai Gold Exchange withdrawals 2014 week 23

 

 

 

Chinese net gold import

 

Since we know how much scrap was supplying the SGE in 2013, 229 tonnes, we can make better estimates on what is supplying the SGE this year. By using the basic equation we can estimate net import.

 

 

import + mine + scrap = total supply = SGE withdrawals = total demand

 

 

import = SGE withdrawals – mine – scrap 

 

Year to date (week 1 – 23) SGE withdrawals have been 850 tonnes, Chinese mines have produced 168 tonnes (based on mining figures from the China Gold Association) and scrap supply has been 101 tonnes (based on 229 tonnes in total this year, the same as last year). This brings net import year to date to 581 tonnes, annualized 1314 tonnes.

 

This way of calculating net import gives us a good estimate. Meanwhile, the mainstream media is loosing sight on Chinese imports as more will come in directly through Shanghai, bypassing Hong Kong – whose gold trade with China was often used as a proxy for total Chinese gold import.

 

 

 

Shanghai silver demand

 

On the Shanghai Futures Exchange (SHFE) all silver futures contracts came out of backwardation this past week (week 24), and on June 13, most Shanghai silver premiums over international price closed under 6 %.  In the week before they all closed above 6 %.
Meaning the scarcity for silver in Shanghai is decreasing.

 

June 13 Shanghai silver premiums:

 

- Ag1406 (9999) front delivery month contract on the SHFE closed at 5.1 %

- Ag99.99 (9999) T+2 spot contract at the SGE closed at 5.3 %

- Ag(T+D) (9999) spot-deferred contract at the SGE closed at 4.8 %

- GB1 (9999) spot contract at the Shanghai White Platinum And Silver Exchange closed at 5.3 %

 

Note, the prices quoted on all these exchanges that I used to calculate the premiums include 17 % VAT.

 

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Overview Shanghai Gold Exchange data 2014 week 23

 

- 27 metric tonnes withdrawn in week 23 (3-6-2014/6-6-2014)

- w/w – 24.45 %

- 850 metric tonnes withdrawn year to date, 1922 tonnes annualized.

 

My research indicates that SGE withdrawals equal Chinese wholesale gold demand. For more information read this.
The Real Asset Co. Buy Gold Online
Shanghai Gold Exchange withdrawals 2014 week 23

 

 

This is a screen shot from the weekly Chinese SGE trade report; the second number from the left (blue – 本周交割量) is weekly gold withdrawn from the vaults in Kg, the second number from the right (green – 累计交割量) is the total YTD.

 

 

Schermafbeelding 2014-06-14 om 16.54.33

 

 

This chart shows SGE gold premiums based on data from the SGE weekly reports (it’s the difference between the SGE Au9999 gold price in yuan and the international gold price in yuan).

 

 

SGE gold premium

 

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Comments

  1. 60+ tons of silver just left the SLV ETF.  What are the odds it showed up in Shanghai ???
     

  2. Ex-goldman director goes to Prison ~ http://mobile.reuters.com/article/idUSKBN0ES1WE20140617?irpc=932

    It is only 2 year sentence, so he walks in 1 year, but a dent in his lifestyle.

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