Shanghai Silver Remains in Backwardation

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– 30 metric tonnes withdrawn in week 20 (12-5-2014/16-5-2014)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– 751 metric tonnes withdrawn year to date.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a screen shot from the weekly Chinese SGE trade report; the second number from the left (blue – 本周交割量) is weekly gold withdrawn from the vaults in Kg, the second number from the right (green – 累计交割量) is the total YTD.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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