SHFE silver backwardation may 23, 2014The physical silver shortage in Shanghai continues…

 

 


Submitted by Koos Jansen, In Gold We Trust:

In week 20 (12-05-2014/16-05-2014) gold withdrawals from the Shanghai Gold Exchange vaults, which equals Chinese gold demand, accounted for 30 metric tonnes. 8 tonnes below the year to date average.  Although 30 tonnes of demand in one week is not particularly low, it seems the Chinese are taking a break from their exceptional strong buying in 2013 and in the first quarter of 2014.

From Chinese state TV network CCTV:

 

 

 

 

I hope to have more information on the potential alliance between the Shanghai Gold Exchange and the Chinese Gold and Silver Exchange, which is based in Hong Kong, in the near future.

 

The SGE silver premium, as measured by the price of SGE’s most liquid contract Ag(T+D) compared to the COMEX price, stood at 5.4 % on May 16. On that day total SGE silver inventory stood at 76 tonnes.

 

 

Shanghai Gold Exchange silver premium

 

 

Total silver inventory at the Shanghai Futures Exchange (SHFE), that only has vaults in Shanghai, was 228 tonnes on May 23. Down 954 tonnes from 1182 tonnes on February 8, 2013.

 

Currently a few silver futures contracts on the SHFE  are in backwardation, for example the December 2014 contract.

 

 

SHFE silver backwardation may 23, 2014

Note, the open interest on the SHFE is counted bilaterally, different than from COMEX. For the December 2014 contract there are 209125 longs and 209125 shorts.

 

 

On the SHFE the closing silver price on May 23 (of the first delivery month) was 4139 yuan per kilogram. On the South Rare Precious Metals Exchange (SRPME), that has vaults in Hechi, Chenzou and Yingtan, it was 4074 yuan per kilogram. The SGE’s Ag(T+D) contract closed at 4114 yuan per kilogram. The spread between the SRPME and the SHFE has been significantly reduced in the last 10 days.

 

 

Map Chinese silver vaults

 

 

 

Overview Shanghai Gold Exchange data 2014 week 20

 

- 30 metric tonnes withdrawn in week 20 (12-5-2014/16-5-2014)

- w/w + 6.95  %

- 751 metric tonnes withdrawn year to date.

 

My research indicates that SGE withdrawals equal Chinese wholesale gold demand. For more information read this.

 

 

Shanghai Gold Exchange withdrawals 2014 week 20

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a screen shot from the weekly Chinese SGE trade report; the second number from the left (blue – 本周交割量) is weekly gold withdrawn from the vaults in Kg, the second number from the right (green – 累计交割量) is the total YTD.

 

 

Shanghai Gold Exchange withdrawals week 20 2014

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

 

 

Shanghai Gold Exchange gold premiums 2013 2014 week 20

 

 

 

Below is a screen shot of the premium section of the SGE weekly report; the first column is the date, the third is the international gold price in yuan, the fourth is the SGE price in yuan, and the last is the difference.

 

 

Shanghai Gold Exchange gold premiums 2014 week 19 and 20

 

 

In Gold We Trust

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    • “Only from people stupid enough to trust a bullion bank…”
       
      Well, they HAVE to start somewhere.  Might as well be there.
       
      This is a bit like the hue and cry over some in the UK trying to pass a law that makes it easier to confiscate the bank accounts of those who refuse to pay their taxes.  SGTReport is virtually hysterical about this, yet seems to omit the fact that this will only be authorized for those people who refuse to pay their taxes and not just anyone.  While I dislike paying taxes as much as anyone, it IS the system that we have.  If I owe it, I pay it.  Simple and WAY less trouble than pi$$ing and moaning about the system we have.  Anyone who doesn’t like it can look for ways to change it.  Change is possible but difficult, so gird those loins and have at it.
       

  1. There is lots of silver. Theses articles are just nonsense. The price is set on the comex not in shanghai. There has been a shortage of silver and gold now for over 2 Years???? and where is the price? The Fed is tapering and will continue to do so.

    • Wrong. The Fed is not tapering. Look at foreign purchases like Belgium. Hambone covered it here the other day with all the numbers and facts. It is shadow QE, and is increasing.

  2. Quite impressive how they manage to find new ways all the time. Prolonging these make belief markets. And our entry point.
    If someone started stating north of $40, they can be close to $20 by now, certainly after a few smart flips. We’re talking silver, but the opportunity is golden. Loving every minute of it.

    • “Loving every minute of it.”
       
      Absolutely!  Yet, to hear all the moaning about low PM prices, one would think that having PMs on sale was the worst thing ever.  It’s not.  In fact, a decent argument could be made for it being one of the best things ever.  :-)
       

  3. 5/28/2014:
     
    Something appears to be happening in the Silver market definitely.  Besides the backwardation going on in China, today the Silver price appears to be driving the price of Gold.  For example, Silver dipped below $19.00/oz and made a reversal, and it is at that point that Gold made a reversal as well.  It was not like Gold went below $1,250/oz and made a reversal, so it does appear clearly that the reversal in precious metal prices was due to Silver, not Gold.
     
    In any event, what is it in the market that ‘requires’ Gold and Silver prices to move in the same direction the great majority of the time?…

    • While there is no requirement for silver and gold to move in the same direction all the time, their similarities as commodities and historical monetary metals pretty much ensures that they tend to move up and down at about the same time.  This is not too different from oil and gas, which are similar but not identical energy products / commodities.

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