Over the last ten months I have pointed out that demand for physical gold was increasing and that much of the demand was coming from China. Because China does not often provide information on their gold holdings it is often difficult to know just how much gold they have. This has led to much speculation. Today though, we get a least a partial update (Though I suspect given Chinese lack of transparency the real number may be even higher):
First it was more than the UK. Then more than Portugal. Then a month ago we said that as of September, "it is now safe to say that in 2012 alone China has imported more gold than the ECB's entire official 502.1 tons of holdings." Sure enough, according to the latest release from the Hong Kong Census and Statistics Department, through the end of August, China had imported a whopping gross 512 tons of gold, 10 tons more than the latest official ECB gold holdings. We can now safely say that as of today, China will have imported more gold than the 11th largest official holder of gold, India, with 558 tons.
Yet despite importing more gold than the sovereign holdings of virtually all official entities, save for ten, importing more gold in July than in any month in 2012 except for April, importing more gold in 8 months in 2012 than all of 2011, and importing four times as much between January and July than as much as in the same period last year, here is MarketWatch with its brilliant conclusion that the 'plunge' in gold imports in August can only be indicative of the end of the Chinese gold market, and the second coming of infinitely dilutable fiat.
There is spin, and there is of course, reality. We urge readers to identify where on the chart below is the evidence of Chinese disillusionment with gold:“China’s near-term appetite for gold appears to be waning as bullion imports from Hong Kong slow,” HSBC analysts said in a note following the data release last week.
Anecdotal evidence also pointed to the cooling trend, with one Hong Kong bullion dealer saying the word from mainland clients was that gold inventories are saturated.
“What we are hearing from our customers is that they were buying gold rapidly over the last couple of years, but they would now see some of their stocks sold off before they rebuild some of their inventories,” Scotia Mocatta managing director Sunil Kashyap said in Hong Kong.
Furthermore, with the status quo cartel in desperate need of China stepping up its monetary easing, and jumping right into the race to debase, which is absolutely critical to halt the plunge in tech company revenues and earnings, any interim slowdown in purchases is merely a springboard for even more purchase in the future once inflation does come back to China with a bang.
Incidentally, one thing that MarketWatch completely forgot about is that in Q4 Chinese gold purchasing, all monetary else equal, is set to spike in Q4. From the South China Seas:
All rhetoric aside, one unspinnable aftereffect of China's relentless appetite for gold comes from a different place, namely Australia, where gold just surpassed coal as the second most valuable export to China. From Bullionstreet:Fung expects gold imports on the mainland to stay soft this month as prices have continued to remain high.
"However, gold consumption is likely to climb again in the fourth quarter, a traditionally peak season when Chinese people buy gold jewellery for weddings and presents," he added.
In other words, take the chart above, showing only Chinese imports through HK, and add tens if not hundreds more tons of gold entering the country from other underreported export channels such as Australia. One thing is certain: China no longer has any interest in buying additional US Treasurys. What it does have an interest in is up to readers to decide.Australia's gold sales to China hit $4.1 billion in the first eight months of this year as it surged by a whopping 900 percent.
According to Australian Bureau of Statistics, the yellow metal became the second most valuable physical export to China, surpassing coal and only behind iron ore.
The unprecedented jump in gold sales, along with continued acceleration of export revenues for other commodities led by coal, up 80 per cent to $4bn, caused total exports to China to rise by 10.7 per cent for the year to August, the Bureau said.
Perth Mint supplied most of the gold to China through a variety of banks.
Analysts said Chinese buyers are hoarding the precious metal amid a slowing economy, property-buying restrictions and uncertain financial markets as its central bank increases its holdings.
China's foreign currency reserves of gold are low and its move to build them up will provide an important base demand for gold, they added.
For previous stories on Chinese gold buying click the links below:
Titanic War in Gold Between East & West
Hong Kong to Open 1,000 Metric Ton Gold Vault
China Imports More Gold From Hong Kong In Five Mon...
News From the "London Trader"
More Gold is Leaving "The System"
John Embry on China & Gold
More on China and Gold
China takes advantage of US Fed stupidity