A couple of remarkable items hit the wires late last week. I thought we should begin this week with a recap.
Late Friday, this story appeared at ZeroHedge: http://www.zerohedge.com/news/2013-11-22/where-did-all-gold-go
The ZH article included this chart by Goldman Sachs, sourced from Bloomberg, who themselves sourced it from the IMF:
On the surface, we have a neat little chart. It purports to show that some countries are selling gold and some countries are acquiring it, all in a zero-sum vacuum. For example, where Turkey has acquired 250 metric tonnes, Austria as sold 250 metric tonnes. OK, fine. You can just stop there if you want...but...does anything else stand out to you? We'll get back to that in a moment but, first, let's look at the other interesting story from last week.
The link to this Reuters story is here: http://in.reuters.com/article/2013/11/20/china-gold-imports-idINL4N0J410Y20131120
With jaw agape, I read this story on Wednesday, literally stunned that it had seen the light of day. A few of the highlights:
- Gold shipped from Hong Kong to the mainland, used as a proxy for Chinese demand as bullion imports are a state secret, nearly tripled to 855 tonnes in the year to September. But a surge in China's gold purchases as prices slumped by a quarter this year has also seen at least 133 tonnes shipped directly, according to Reuters calculations based on data from Global Trade Information Services (GTIS).
- The 133 tonnes does not include gold bought by China's central bank. China said in 2009 that its official reserves of gold stood at 1,054 tonnes but it does not publish regular updates. Industry watchers estimate Chinese reserves may range from 4,000 to 5,000 tonnes by next year.
- Increasing flows through Shanghai - which are legal but only a fraction of the total because gold is mostly shipped from trading hub Hong Kong - underscore a government push to make it easier for its citizens to buy and trade gold.
- Redemptions from gold-backed exchange-traded funds (ETFs) have jumped as the price of bullion has fallen - 650 tonnes from the top eight funds so far this year - and much of that may have headed to China from Europe. Refiners say they have been converting 400 ounce bars typically bought by ETFs into 1 kg bars (kilobars) to be shipped to China. Kilobars are used for making jewellery and are also popular as an investment product. "We see huge flows of gold in and out of Switzerland, an inflow of large bars, which we convert to smaller bars," Scott Morrison, chairman of gold refiner Metalor, said from Neuchatel. "From April to August, we saw very large volumes from all our refineries headed to Asia," he said, adding that the bulk of the company's production in Hong Kong went to China.
(As an aside, I might remind you that Turdites were the first to learn of this massive Swiss refinery backlog of 1-kg bars heading to China. I wrote about this in June of 2012: http://www.tfmetalsreport.com/blog/3924/gonefor-good)
Anyway, please be sure to read the entire Reuters story as it confirms many of the things that I and other precious metals analysts have been telling you for months.
But here's the thing...and the point of this post. This paragraph of the Reuters story is the one I want to focus on:
"The 133 tonnes does not include gold bought by China's central bank. China said in 2009 that its official reserves of gold stood at 1,054 tonnes but it does not publish regular updates. Industry watchers estimate Chinese reserves may range from 4,000 to 5,000 tonnes by next year."
You, me and everyone else knows that the "official" Chinese reserve numbers are bogus. As noted above by Reuters, China has chosen to not release and officially update their gold reserve totals. The last update was in 2009 when they publicly confirmed that they had a stockpile of 1,054 metric tonnes. They've been quiet on the subject since.
Fortunately, however, the amount of gold flowing from Hong Kong into the mainland is chronicled and logged each month. Once again, Zerohedge provides some excellent material and below are just a few of the charts I've saved recently:
Want even more info? Koos Jansen does a terrific job monitoring the Chinese import numbers. Within this article of his posted two weeks ago (http://koosjansen.blogspot.com/2013/11/greater-china-net-import-1316-tons-ytd.html), I found these two charts:
Rather than source the abundance of information currently available regarding Chinese demand, Goldman chooses instead to use the Bloomberg/IMF data for their chart and research report. This is the same GoldmanSachs, mind you, that tells their clients that gold is heading to $1050 (http://www.cnbc.com/id/101220299), all the while accumulating shares in the GLD at a rate four times faster than anyone else on the planet. (http://www.zerohedge.com/news/2013-08-30/guess-which-bearish-bank-bought-record-amount-gld-q2)
This got me wondering: What if Goldman chose to present the same information....in the same zero-sum, bar graph structure...only instead used the more accurate, unofficial Chinese reserve numbers? How would the chart look if, instead of 700 metric tonnes, the Chinese reserves were listed at 4,000 metric tonnes?
A quick email to our resident Photoshop expert, Pining4TheFjords, and I got my answer:
WHOA!! That changes things a little, doesn't it? I guess now we know why Goldman chose to use the bogus IMF numbers....This chart wouldn't have fit on the page!
And just as significant as the tall, Chinese import bar...Who the heck is the "mystery seller" with the other massive red bar??? Hmmmm???? Any guesses????
So, anyway, just another case of the truth being kept from the light. So Goldman misleads their clients...what else is new? So the IMF and Bloomberg don't bother to do their own homework on Chinese demand....and this surprises anyone? Whatever. Almost everyone stuck in yesterday's paradigm does so willingly anyway. At least YOU know The Truth. YOU know that Chinese and other "BRIC" nation demand is steadily breaking the current, fractional reserve bullion banking system. And YOU know to accumulate physical metal, just like The Chinese and while you still can, in preparation for The End of The Great Keynesian Experiment.