Guest Post: "Confirmation That PBOC Does NOT Purchase Gold Through the SGE", by Koos Jansen

Mon, Oct 6, 2014 - 12:02pm

This week's guest for our "A2A" webinar series will be Dutch metals analyst, Koos Jansen. In preparation, I urge everyone to read this extremely important, new post that Koos put out last Friday.

The original link to Koos' article can be found here: and I strongly encourage you to bookmark/favorite the BullionStar site for immediate access to all of Koos' articles.

After reading this post, I was able to draw several important conclusions:

  • The mainstream media is grossly underestimating total Chinese gold demand
  • The World Gold Council is primarily responsible for this error
  • The World Gold Council almost seems to be doing this deliberately
  • Koos' current estimate of PBOC holdings at 4,000+ mts might be too conservative

These conclusions led me to these critical questions:

  • If it was understood that total Chines holdings (PBOC + "civilian" holdings) actually exceeds 15,000 mts, what would be the market reaction?
  • And from where in the heck is all this gold coming???? China publicly states that they mine and "recycle" just 700 mts/year. From where do they source the other 1500 tonnes of "civilian" demand plus all of their PBOC demand????

Please take the time to thoroughly read this extremely important post.


"Confirmation That PBOC Does NOT Purchase Gold Through the SGE"

by, Koos Jansen of

Last week I wrote Scotiabank had released an unveiling report on Chinese gold demand, written by Na Liu of CNC Asset Management Ltd.. In the report Na stated what I've been publishing for over a year: the amount of gold withdrawn from the vaults of the Shanghai Gold Exchange equals Chinese wholesale gold demand. This report put a little smile on my face as it was another confirmation of my research (SGE chairman Xu Luode previously confirmed the relationship between withdrawals and demand, at the LBMA forum in Singapore).

Soon after, I reached out to Na asking if he would like to share some of the details of his research. He was happy to tell me what he had found during his trip to Shanghai meeting the President of the SGE Transaction Department. Additionally he told me he was perplexed by the difference between actual Chinese demand and the numbers from the World Gold Council and China Gold Association. The discrepancy was such wide it made him doubt if he wasn't missing anything. I told him I walked the same trail. I can remember when I first read the Chinese SGE weekly reports and couldn't believe the tonnage being withdrawn from the vaults. Later on, when I discovered these amounts equal wholesale demand I spent quite a few weeks thinking through all data and evidence I'd collected. How can the Wold Gold Council be so wrong?

Ok, I was 'a little' off in predicting when mainstream media would find out about actual Chinese gold demand.

I sent Na all in-depth analyzes I've written on In Gold We Trust and (I, II, III, IV, V, VI), which strengthened his understanding of the Chinese gold market even more. He was no longer hesitant to publish an additional report on the Chinese gold market, disclosing exactly what he found out in Shanghai. On September 29 The Mystery of China’s Gold Demand was released [brackets added by me for in-depth analyzes]:

The Mystery of China’s Gold Demand

Over the years, we, like most investors, track China’s gold demand by following the estimates made by the China Gold Association (CGA) and the World Gold Council (WGC). For instance, the China Gold Association said China’s total gold demand in 2013 was 1,176.4 tonnes and the World Gold Council said China’s total “consumer demand” was 1,065.8 tonnes. So, in 2013, China’s gold demand was slightly over 1,000 tonnes, we initially concluded.

This is why we were shocked by what the Shanghai Gold Exchange (SGE) told us earlier this year. Back in May, we participated in a Canadian institutional investors’ trip to China organized by Scotiabank. The Canadian delegation visited the Shanghai Gold Exchange and met with President of the SGE Transaction Department and other senior officials. The delegation was told by our Chinese host that China’s gold demand was about 2,200 tonnes in 2013, judged by the withdrawal amount from the SGE vaults.

[as I've written in SGE Withdrawals Equal Chinese Gold Demand, Part One, and Part Two]

Apparently, the SGE’s estimate of Chinese demand is much higher than the estimates made by CGA and WGC. If China’s actual gold demand is over 2,000 tonnes rather than slightly over 1,000 tonnes, then the gold market could be a lot tighter than thought. As such we asked a lot of questions to the SGE executives in the meeting and when we were back, we carefully reviewed the trading mechanism of the SGE in the past few months.

After all our work, as we wrote on September 25, we are now of the view that to understand China’s real physical gold demand, investors should simply look at the weekly withdrawals from Shanghai Gold Exchange vaults (Exhibit 1). The weekly withdrawal figures provide a much more accurate data series that reflects China’s aggregate wholesale demand in a timely way. This is because for tax purposes all gold imported into China and all gold produced within China must pass through the vaults once, and only once, before reaching jewelry makers, investors, industrial users, and consumers.

We hesitated over the past few months in publishing our findings from our May meeting with the SGE as these findings are non-mainstream. Now, as we are becoming more convinced, we want to share the following comments made by the SGE executives to the Canadian delegation.

First, the withdrawal data reflects the actual gold wholesales in China. In 2013, the total gold withdrawal from the SGE vaults amounted to 2,196.96 tonnes. The President of SGE Transaction Department (The President) said: “This 2,200 tonnes of gold, after leaving our vaults, they entered thousands of Chinese households in the form of jewelry and investment purchases.”

[as I've written in Is The World Gold Council Clueless On Chinese Gold Demand?]

Second, none of the 2,200 tonnes of gold was bought by the Chinese central bank. The President said: “The PBOC does not buy gold through the SGE.”

[as I've written in SGE Withdrawals Equal Chinese Gold Demand, Part Three and Does The PBOC Purchase Gold Through The Shanghai Gold Exchange? and Does The WGC Understand The Chinese Gold Market?]

Third, the financing deals do not exaggerate SGE’s assessment of China’s gold demand. This is because “the financing deals do not take place after the gold leaves the vaults.”

[as I've written in The Round Tripping Myth And Why It Doesn’t Hurt Chinese Gold Demand]

Fourth, in response to our question about the source of the 2,200 tonnes, he replied: “About 1,500 tonnes from imports, some 400 tonnes from domestic mine output, and the rest is recycled gold.”

[as I've reported in SGE Chairman: China Should Become First Class International Gold Market]

And last, when we asked why the China Gold Association’s number is so low, the President said: “They mainly cover the gold sales through the gold shops. This is their main source of information. And their number is quite useful in that way. However, our system has broader coverage.”

[as I've written here]

So here is our current conclusion after several months of deliberation. We think the SGE withdrawal data is a fair representation of China’s wholesale gold demand. Again, this is because for tax purposes all gold imported into China and all gold produced within China must pass through the vaults once, and only once, before reaching jewelry makers, investors, industrial users, and consumers.

Lastly, we do note that in recent weeks, the withdrawal number is getting bigger (Exhibit 1). This might indicate the de-stocking process is coming to an end. We maintain our relatively cautious “market weight” call for the gold sector from a China perspective for the time being. In the meantime, we will closely monitor the weekly withdrawal data to decide whether we should turn more positive.

Latest SGE withdrawals numbers (- Sep 26, 2014).

Not only does this, again, confirm SGE withdrawals equal Chinese wholesale demand, additionally it confirms that the PBOC does not buy 1 gram of gold through the SGE (as I've explained in this post).

Two more important statements for me to make:

1) Because we have additional consolidation about the workings of the SGE, Chinese import and PBOC purchases, the next chart is now confirmed to be fairly accurate. China holds (including September 2014) approximately 11,224 tonnes in non-government gold reserves and officially 1,054 tonnes in reserves at the PBOC. However, from various high ranking Chinese officials we know the PBOC has been steadily accumulating gold since 2009, which make current PBOC reserves likely to be 4,000 tonnes. In total there are about 15,224 tonnes of physical gold reserves in China mainland.

(for a detailed explanation of how I conceived this chart read the last bit of this article)

2) There is now so much evidence the demand numbers from the World Gold Council are erroneous the WGC is obligated to either revise their numbers upwards, or cease reporting on the Chinese gold market all together. Until then their numbers on Chinese demand are completely unacceptable.

Koos Jansen

About the Author

turd [at] tfmetalsreport [dot] com ()


arch stanton
Oct 6, 2014 - 12:09pm

numero uno

and buying EXK again today

Spartacus Rex
Oct 6, 2014 - 12:27pm


PBOC has been busy ordering from the U.S. Mint! Haven't anyone been paying attention?

Cheers, S. Rex

Oct 6, 2014 - 12:29pm

un-federal reserve losing gold, 39Tons in 2 months and 70T ytd

New York Fed Gold Stock Tumbles 15 Tonnes In August

Could it be sie Germans?

Published: 02-10-2014 18:05

Every month the Federal Reserve bank of New York (FRBNY) publishes the amount of gold it holds in custody for 36 foreign central banks and the IMF. After a significant drop in July of 24 tonnes, 15 tonnes were withdrawn from the vaults in August. Germany is the only country, that I'm aware of, currently repatriating gold from New York. This suggest all withdrawals year to date have been shipped to Frankfurt.

Year to date 70 tonnes of gold have left the FRBNY vaults. Germany's central bank, the BundesBank, has stated the 5 tonnes of gold they repatriated in 2013 from New York did not meet the London Good Delivery (LGD) standards of 99.5 % purity. Suggesting the repatriated bars could have been coin bars, melted from golden coins that are an alloy of gold and, for example, copper. A long long time ago when gold coins circulated in the economy as money, these coins were an alloy of gold and other metals which made them more durable.

The coin bars can also be seen on the bar list of the gold stored in Fort Knox. The spreadsheet of that bar list can be downloaded here (click download). The fineness tells you the purity. The average purity of the 446,698 bars in Fort Knox is 92%. Meaning there are a lot of coin bars in Fort Knox.

Germany is one of the few counties that 'recently' has published the exact whereabouts of it's sovereign gold. Click here for the list published in 2012. However, they haven't released a bar list that would expose what type/purities of bars are allocated at what storage facility.

ETA: I haven't seen this anywhere, nor heard any discussion of it around here, entirely possible that I missed it however. If my posting is the first about it, then it's certainly a new wrinkle to consider in the recent price action. Is 70 tons enough to have moved the price down ~$140 as we have seen? Doesn't explain Ag/Pt/Pd/oil, so I think not.

(repost from friday podcast thread)

Oct 6, 2014 - 12:42pm

lots of gold into China!

no so much into US

Oct 6, 2014 - 12:50pm

Well, perhaps the people of china more prepared

to embrace liberty and freedom with precious metals in the hands of the people? We the people have been too long in sleepy hollow and it's leaving a majority of U.S. Citizens to be pants down; naked in the streets with any new precious metals backed reserve currency.

Oct 6, 2014 - 12:50pm

Well, perhaps the people of china more prepared

to embrace liberty and freedom with precious metals in the hands of the people? We the people have been too long in sleepy hollow and it's leaving a majority of U.S. Citizens to be pants down; naked in the streets with any new precious metals backed reserve currency.

Oct 6, 2014 - 12:55pm

Ask yourself this... Is it

Ask yourself this...

Is it reasonable to assume that what some folks are estimating to be the above ground supply of gold 170.000 MT is the LOGICAL TOTAL AMOUNT???

A simple som...

+/- 2.400 MT is the years mine world gold production.

So lets say 2000 years of gold mining than the total above ground supply would be 480.000 MT.


Who knows..


Motley Fool
Oct 6, 2014 - 1:15pm


Yes. Mining production hasn't been constant the last 2000 years.

Oct 6, 2014 - 1:20pm

A better time for action

Remember TF's Time for Action post? Then we got all sidetracked on Andy Maguire and the Cohan article that should have been published years ago. Being old news, even if it did get published how much attention would it have gotten. I think doing what we can to promote the findings of Koos Jansen is a better direction of the,"time for action".

Koos has the numbers and is getting more conformation from Na that should blow the lid off the MSM reporting of low demand for gold. We either need the WGC to subject themselves to a true analysis or find a more mainstream source to confirm Koos Jansen's number or better yet both. Couple that with the known volumes of gold in the other markets in the world and your going to come up with a demand 1,000 tons or so, over mining and recycling totals. This would force the financial media to consider where those considerable volumes are coming from.

Koos Jansen was one of my favorites as reliable sources as I have always felt he lays out such a great case with the SGE so I'm biased toward him I guess. I think after more here at Turdville check Koos out more closely they will feel the same.

My question to Koos would be, who could be a trustworthy source of conformation the the financial media couldn't ignore? Not that I have to be convinced but somehow we have to get Koos front and center with the financial media crowd and that will require more conformation of his findings.

This story revealed with mainstream general acceptance blows the lid off the demand story and whole suppression scheme. It will make the investors that have listened to MSM sources realize they've been duped.

Oct 6, 2014 - 1:27pm

metals up

then a nice little pop as well, hmmmm, trend change?

kudos to koos, rockin the slow boat. :)

Key Economic Events Week of 10/21

10/22 10:00 ET Existing home sales
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Key Economic Events Week of 10/21

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Key Economic Events Week of 10/14

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Key Economic Events Week of 9/30

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Key Economic Events Week of 9/16

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Key Economic Events Week of 9/9

9/10 10:00 ET Job openings
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