Tuesday, September 16, 2014

Gartman Letter cites Koos Jansen and Gold Newsletter on Chinese gold demand

GATA shared Dennis Gartman, The Gartman Letter's, latest:

Regarding Chinese gold demand, which we wrote about yesterday, it is open to debate and our old friend, Brien Lundin of the Jefferson Companies in New Orleans, wrote to share his insights. We've chosen to share them further with our readers, with his approval. Brien wrote:

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Hi, Dennis:

In your letter this morning, you noted that Chinese gold demand was recently reported to be down about 50 percent year over year. This is erroneous information from the World Gold Council, as I've been noting in Gold Newsletter --


Here's an explanation that I put in our September issue.

"There's a lot of misinformation on this topic. The mainstream financial media keeps parroting numbers from the World Gold Council and other sources, which typically rely on import statistics from Hong Kong. However, China has recently opened up new ports of entry for gold, a move that has correspondingly reduced the import numbers from Hong Kong.


"Much more relevant are gold delivery statistics from the Shanghai Gold Exchange, which directly indicate wholesale gold demand in China. Koos Jansen of --


-- and --


-- is today's leading reporter of Chinese gold demand dynamics, and he relies on the Shanghai Gold Exchange numbers for his analyses. Using the SGE reports, Jansen notes that Chinese gold demand year to date is down about 17 percent from last year's torrid pace.

"In comparison, the financial media is reporting that Chinese demand is down about 50 percent over last year.

"So you can see that China -- while certainly not buying as much gold as last year -- is still buying the metal at a level that, if not for last year, would have set records.

"Moreover, Jansen is reporting that SGE deliveries over the past couple of weeks have risen significantly, an indication that China is now returning to the market as bulls have hoped. If the current levels keep up, the difference between last year's buying levels and this year's will narrow considerably.

"Add it all up and we see that just as the cure for low prices is low prices, the current decline in gold could in itself spawn a powerful short-covering rally in the near future. It's also running straight into a growing headwind of Chinese buying."

I thought you'd like to be aware of this issue, Dennis, as the facts on the ground in China run counter to the prevailing wisdom regarding gold demand in the markets. There's much more behind it, including why the SGE is more accurate than the World Gold Council numbers and why the WGC is relying on Hong Kong statistics and reports from the China Gold Association.

The bottom line is that Chinese gold demand is still price-sensitive and a bit lower than last year, but it is has also maintained a basic run-rate that is far higher than anything experienced before 2013 and still rivals the record levels of last year. Longer term, it seems that the growing gold demand in China is an instrument of official policy to some extent, the purpose of which will be revealed over the coming months and years.

All the best, and keep up the great work.

-- Brien

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This is not even "Gold bug-y"-type work. This is hard data mining and we find it interesting, wondering why the World Gold Council of all groups might have gotten this wrong.

September 16, 2014 (Source: GATA)



The Original
Vulture Speculator

Trading gold, silver and mining shares since 1980 with a focus on taking advantage of volatility extremes, Gene Arensberg analyses the markets through a basket of technical and fundamental indicators and shares his findings from time to time here at Got Gold Report. Mr. Arensberg has been quoted in the Wall Street Journal, Dow Jones MarketWatch, USA Today and dozens of other news organizations.

"I've been a huge fan of Gene and his amazing work for years..."

Brien Lundin, CEO, Jefferson Financial, Host of the annual New Orleans Investment Conference and Publisher of Gold Newsletter

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