An article surfaced today in China discussing a new player in the gold market that has Wall Street running scared The new player is the Chinese housewife. This typical Chinese housewife as described in the article is between 40 to 60 years old with investable assets of between $10,000-$10 million dollars. This representative housewife in addition to her assets also has what approaches zero knowledge of investment knowledge.

The article goes on to give one example Of these “Mad hunters of Gold” whom they call Auntie Kimmy. Auntie Kimmy has purchased $2 million Yuan ($330,00 USD) worth of gold over the last year. When asked if she was disappointed by the decline in gold prices, Aunti Kimmy said, “Not at all, ..this gold is going to my children.”
It is this mentality that has Wall Street nervous. Quoted in the article is State Council Development Research Center, Institute for International Economics Visiting Researcher Zhang Jie who was quoted as saying Wall Street and the Fed should be very nervous. The business of loaning out based on gold reserves is over as once the gold arrives in China, it is never going back.

Stay away from Oil and Gold Investing. The rush is over for at least 20 years. Ruchir Sharma, Portfolio Manager, Morgan Stanley

The wreckage caused by China’s great, juddering slowdown continues to spread far beyond the country’s shores. Although most commodities enjoyed a bounce on May 3, after better-than-expected U.S. employment data, the plunge in their prices over the past few months suggests the past decade’s rally is truly broken.

For those of us not in the mining industry, this is actually good news — one of the best signs yet that the global economy is returning to normal.
China’s voracious demand for every conceivable raw material — oil, steel, soybeans, gold, to name a few — once seemed to spell a future of endlessly rising commodity prices and falling living standards in developed nations. This was a Malthusian vision of scarcity: Rising demand from the growing economies of the emerging world would couple with shrinking supplies to drive up the prices of natural resources. Gas prices would never come back down; gold would cost thousands of dollars an ounce.
The response, for many international investors, was to bet big on China. Because it is hard to buy directly into China, many instead bought into the commodities that were being sucked into the gaping maw of the country’s economy: oil from Russia, iron ore from Australia and so on.
The China-commodity connection was born. Financial entrepreneurs started exchange-traded funds, which allowed individual investors to trade commodities, including silver and gold, as if they were stocks.

Supercycle Started

For the first time, U.S. pension funds started to allocate a share of their holdings to commodities. Even the Federal Reserve got involved, inadvertently, by printing so much money that a good portion of it wound up fueling speculative bets on China and the big emerging markets, often using commodities as a proxy.
Prices went parabolic. From 2000 to 2011, copper prices rose 450 percent, oil prices 365 percent, and gold prices more than 500 percent to a high of more than $1,900 an ounce. There was talk of oil hitting $200 a barrel, and gold reaching $10,000 an ounce. It was a wild time, all predicated on the idea that the rise of China had set off a commodity “supercycle” that could keep prices high indefinitely.
Commodity prices, such as that of gold, tend to rise when faith in the financial system is in decline and usually fall when confidence is high. In this they resemble the politician of whom Winston Churchill once said: “He has all the virtues I dislike and none of the vices I admire.”

The Chinese have been big gold buyers this week.

The world’s largest gold-backed exchange-traded fund saw a spike in holdings of the metal this week, on the heels of a more than 4% weekly climb in prices for the precious metal.

The SPDR Gold Trust  GLD +1.32% shows an increase to 25.925 million ounces as of Thursday, up 0.9% from Wednesday and at its highest total level since Dec. 20.

In the last month, there have been no sales from the SPDR Gold ETF, and 15 metric tons (529,109 ounces) of purchases said Julian Phillips, South Africa-based founder of and contributor to GoldForecaster.com.
“This is tremendously significant because sales of physical gold from these U.S. gold ETFs and from the leading U.S. banks totaled 1,300 metric tons in 2013,” he said. “This formed a key source of supply for gold. All of it went east to Asia never to return again.”

“The reduction in supply from the U.S., as these sales have now halted, is the prime reason the gold price is now rising,” said Phillips, adding that it has nothing to do with U.S. economic factors.
On Friday afternoon, April gold  GCJ4 +1.51% traded at $1,316.30 an ounce on Comex, up $16.20, or 1.3%.  It was poised for a weekly gain of about 4.2%.

Shares of the SPDR Gold Trust climbed 1.1%, trading around 3.8% higher for the week.
Mitul Kotecha, head of global FX strategy at Credit Agricole, said in a note Friday that gold ETF demand appears to have “stabilized” over recent weeks. The poor performance of equities markets since the start of the year has made gold look “more attractive as an investment, while lower yields mean that the opportunity cost of holding gold has lessened.”

Over in China, “demand continues at a rising pace at a level between 2,400 and 2,800 metric tons including local supply, per annum,” said Phillips.
“After the Lunar New Year, demand has jumped again [and] as the Chinese middle classes rise in numbers and in wealth, they will continue to buy more and more,” he said. “As you know, such buying is generational for financial security, not for profits. So it won’t return to the market with high prices.”
So if the U.S. are buyers of gold, it will now have to “pay up for it to shake out weak holders,” he said.

China National Gold Group Corporation, General Manager Sun Zhaoxue has come out and told the world media that the U.S. is suppressing the gold price. The reason for America’s manipulation of gold is to ensure U.S. Dollar dominance on the world stage. America has by default ended up with the world’s reserve currency and therefore , get the world to work for them in exchange for an ever increasing supply of printed greenbacks. He also went on with an excellent analysis on of America’s war against Europe and the Euro using their investment banks.

Another good insight from Sun Zhaoxue is that while major players like Warren Buffet and Goldman Sachs talk about how they hate gold and forecast price declines they have made large bets on gold and gold companies.


 His comments from the Liujiazui economic forum were as follows:

“The hottest topic at the moment is oil and gold. The ground war we are seeing around the world is I think war for oil whereas gold is the currency war. Why? We observe that the integrity was the driver for US Dollar to become world reserve currency. The US Dollar and gold decoupling from 1971 caused the US Dollar to depreciate massively. From 1990 onwards, the Eurozone was in consultation to form a strong Euro to counter the US Dollar, in order to prevent the latter from stripping Europe of its wealth. The Euro was born in 1999, supported by its strong economy and 11,000 tons of golds.

With the birth of the Euro a competitor to the US Dollar was created, and so the US decided to lay a trap for the Eurozone as part of the currency war. Some countries in the Eurozone violated the Eurozone’s norms by issuing bonds. Which entities participated in the issuance? US investment banks. After the debt was issued, it was US ratings agencies that struck a blow to the Eurozone by saying that its economies had problems.

Only gold remains on par with the US Dollar to benefit from the Eurozone and Euros collapse. This is why the US began to suppress gold by issuing a statement two months ago that the Eurozone will sell its gold when it is unable to service its debt, then stating three days later that the news was false. Furthermore Goldman Sachs made a forecast for the gold price at the beginning of the year but suddenly changed its course saying the gold price will fall to $1300. Buffet said that he would not buy gold even if its price fell to 800USD. Our research indicates that Buffet made a lot of money from four gold companies. So his statement is inconsistent with his personal action.

 Bernanke’s speech followed, saying that monetary easing will end, that the US economy is improving. This series of examples shows that the fall of the gold price is premeditated. So I say that this process
is a genuine currency war.

 Many people say that gold is just a beautiful thing. Then we have to ask the US why they store so much gold but instead of selling gold, they issue debt to other countries to rescue the financial market.

 The US owes Germany so much gold but instead of repaying immediately, sets a 2020 deadline to return the gold. From this example and process as well as some typical factors, this is a downright currency war to maintain US Dollar hegemony by defeating all other currencies.

I shall stop here.

Gold bullion has climbed 7.2 percent this year as stocks have dropped 4 percent. There’s been an even more dramatic reversal among gold mining securities, which tend to amplify the gains and losses of the underlying metal. The Market Vectors Gold Miners ETF, following a brutal 54.5 percent decline in 2013, is up 19.2 percent this year.

Jeffrey Gundlach, founder of DoubleLine Capital, an investment firm overseeing $49 billion, said in his 2014 forecast in January that gold and gold miners were ready to rebound. “Sentiment is black as night on gold so I’m actually long on some gold miners,” he said. Gundlach predicted bullion would rise to $1,350 per ounce, an increase of 12.4 percent from its Dec. 31 price. The median forecast for the fourth quarter of 2014, according to a Bloomberg survey of analysts, is $1,225.

Gold’s rise in the last five weeks has caught many analysts by surprise. Goldman Sachs (GS)’s Jeffrey Currie, the bank’s head of commodities research, called the metal a “slam dunk” sell for 2014 in October, after the shutdown of the federal government ended.
Following a big decline in 2013, the gold mining industry could be ripe for more mergers and acquisitions activity. The $10.1 billion of such deals in 2013 was the lowest total since 2004, Bloomberg News reported on Jan. 4. The 10 largest producers are expected to generate free cash flow of $4.17 billion this year, up from negative $1.74 billion in 2013, according to Bloomberg data. The two largest mining companies, Barrick Gold (ABX) and Goldcorp (GG) , report their quarterly earnings on Feb. 13.
Gold bullion gained again in trading today, as Janet Yellen delivered her first testimony to Congress as chair of the Federal Reserve. Yellen said she expected “a great deal of continuity” with the monetary policies of her predecessor, Ben Bernanke. The Fed is now buying $65 billion in bonds each month to stimulate the economy, down $20 billion from its 2013 pace. Many gold bugs predict inflation will follow the central bank’s accumulation of a $4.1 trillion balance sheet.


 Nick Summers covers Wall Street and finance for Bloomberg Businessweek. Twitter: @nicksummers.










 http://www.businessweek.com/articles/2014-02-11/gold-bugs-catch-a-break

Sun Zhaoxue is president of China National Gold Corporation, China’s largest gold mining company.  He is on record indicating that in order to have a strong currency, it must be backed by significant gold reserves.
Below are his comments taken from an article written in 2012 titled “Building a Strong Economic and Financial Security Barrier for China.”  It was published in Qiushi maganzine, the main academic journal of the Chinese Communist Party’s Central Committee:

Mr. Zhaoxue is very influential in monetary policy circles within China.  In 2011, he received the economic person of the year award and is well known for advocating the importance of gold in promoting monetary strength and stability.

The rising frequency of such statements from various official Chinese sources makes it clear that the Middle Kingdom is becoming increasingly irritated with what it considers reckless U.S. monetary policy.
One such source is the Chinese news agency Xinhua, who published the following statement in August of 2011 with respect to the U.S.,

The catastrophe Xinhua is concerned about is not hard to visualize if you are familiar with the severely skewed percentage of official foreign exchange reserves held in US dollars by the world’s central banks, as shown in the chart below.
Again from the 2012 commentary “Building a Strong Economic and Financial Security Barrier for China,” Sun Zhaoxue contextualizes the above chart wonderfully:

In other words, Quantitative Easing (QE) is, at least in part, a means for the U.S. to quietly default on its debts without saying so.

China holds $1.27 trillion in U.S. Treasuries and other U.S. dollar denominated assets, making them the United States’ largest lender.  As a result, the Chinese government is particularly sensitive to monetary policies affecting the value of their massive holdings.
Another critical facet of China’s concern is the fact that they are the world’s largest consumer of a wide variety of natural resources.  The chart below highlights the country’s trade share of several major commodities.  Notice China is well over 50% in gold and iron ore and approaching 50% of world trade for many others, and they are the 2^nd largest oil consumer behind the U.S..
Since the early 1970’s, starting with oil, the U.S. has used its economic and military muscle to coax the world into an odd arrangement that requires countries to buy natural resources with U.S. dollars.  This means that for major commodities, countries must take the additional step of buying dollars before buying resources.
This state of affairs puts China in a difficult position.  Although they have no shortage of U.S. dollars with which to buy resources, thanks to a perpetual trade surplus with its largest trading partner (the United States), they are especially susceptible to U.S. dollar risk from the U.S.’s aggressive dollar devaluation policy of QE-Infinity.

Given China’s voracious and growing appetite for commodities to feed a massive economy that’s finally coming of age, the current U.S. dollar dominant international monetary arrangement is no longer a viable option.

China’s demand for commodities is massive and continues to grow.  At the same time, oceans of new U.S. dollars are being force fed into the global economy, which will ultimately put enormous inflationary pressure under prices.

China has clearly recognized their dollar risk and has responded by aggressively expanding the use of their currency, the renminbi (aka yuan), in international trade.

They are rapidly intensifying their efforts to provide not just themselves, but their global trading partners with an alternative to the inherent dollar trap built into the international commodity trade.
China is in essence developing an escape route for what they perceive as a looming currency crisis in connection with shortsighted US monetary policy and a dollar dominant world.

They are mitigating this issue in a couple of key ways, both of which we have written about before.  They are expanding the use of the Renminbi in international trade while simultaneously developing a robust domestic gold market.

We Prefer Ours, Thanks Though…

On the currency front, currency swap agreements with major financial centers and trading partners make renminbi readily available to merchants through banks in their various home countries.  This allows them to settle trades quickly and conveniently for natural resources without having to buy dollars.
These swap agreements lessen the necessity for central and commercial banks to hold U.S. dollars, thereby reducing exposure and the devaluation risk associated with holding the dollar.
China’s largest swap agreement is with South Korea in the amount of US$62.3 billion. Their second largest is with the European Central Bank in the amount of US$60.8 billion. These agreements are typically valid for three years and are renewable.

China has established swap agreements with 23 countries in all, totaling approximately US$412.6 billion, and the list of participating countries continues to grow.

A New Trend Emerges

Another way the use of the renminbi has been expanding is through trade finance. This refers to the facilitation of capital in the form of cash, credit, investments, and other assets that is essential for international trade to flow.
According to the Society for Worldwide Interbank Financial Telecommunication, or as the organization is more commonly known, SWIFT, the Renminbi overtook the Euro in October to become the second-most used currency in trade finance.
And although the U.S. dollar is by far the most utilized currency for trade finance, representing 81.08% of worldwide transactions, there is a newly emerging trend since last year that is worth taking note of.
In January 2012, the renminbi accounted for just 1.89% of global trade finance. By October 2013, this percentage had risen 4.6 times to 8.66%. Over the same period the U.S. dollar fell in this category from 84.96% to 81.08%.

Below are two pie charts that highlight the change.  It may not seem significant at first glance, but we believe it is fairly apparent that this is just the beginning of a tectonic shift in the international monetary order.  Note the rapid expansion of the use of the Chinese yuan in just 22 months.
Anyone want to hazard a guess at what the pie chart will look like in another 22 months?

In response to this development Reuters reported that, “[T]he world’s second-largest economy [China] is accelerating the pace of financial reform to promote its currency to international players beyond Hong Kong. China aims to lift the yuan’s global clout and reduce its reliance on the U.S. dollar.” [Emphasis added]

China = Gold

As discussed above, China is concerned about the quality of its foreign exchange portfolio, especially the sizeable component made up of U.S. dollars.  Because of this, they are aggressively working to diversify both their foreign exchange reserves and their citizens away from dollars by developing the largest gold market in the world.
We have repeated ad nauseam the fact that China is now the world’s large producer and consumer of gold…by far.
They have not only opened the golden floodgates via production and imports, but they are also developing the laws, institutions, exchanges, financial vehicles, and incentives to encourage large-scale gold trade and ownership by its citizens.
At the same time, the People’s Bank of China (PBOC) is accumulating gold reserves at an unprecedented pace in an effort to diversify its U.S. dollar dominant foreign exchange reserves.
The PBOC is estimated to add 600 tonnes of gold to their reserves by the end of this year, which is roughly 25% of the world annual mine production (excluding China’s production).
In association with substantial PBOC purchases, China’s net gold imports from Hong Kong in October were 131.19 tonnes, the second-highest import month on record.
Taking into consideration this latest data, China has now imported, through Hong Kong alone, 1,586 tonnes of gold, or 66% of annual mine supply (again excluding China’s production).
To conclude this week’s commentary on the Chinese gold market, we would like to revisit an article we published back in July titled “China to Buy Barrick Gold.”
The synopsis of that piece was that China’s hunger for gold and its stated strategic initiatives for developing their gold market would lead them inevitably to secure part of this gold supply through the acquisition of a major gold producer. The logical target we posited at the time was mega-major Barrick Gold Corp.
This week, Barrick’s board announced that John Thornton, a former president of Goldman Sachs, would be their next chairman.  In an effort to right Barrick’s many woes, Mr. Thornton is reportedly trying to establish partnerships with Chinese companies.

One potentially interested party is rumoured to be China Investment Corp. (CIC), the sovereign wealth fund responsible for investing China’s massive foreign exchange reserves.  Mr. Thornton just happens to be a member of their international advisory board.
It’s probably just a matter of time now.

The Writing is on the Wall

“The writing is on the wall” is an idiom for “imminent doom or misfortune” suggesting “the future is predetermined.”

We believe China sees “the writing on the wall” in regard to the U.S. dollar and is taking action to position themselves for a new international monetary regime. This suggestion is echoed in a statement made by Liu Zhongbo of the Agricultural Bank of China in January of this year:

This statement suggests that China expects a monetary shift to happen sooner rather than later.  Their aggressive push to internationalize the renminbi and back it with substantial gold reserves, along with their sustained commitment to opening up and building the infrastructure for world leading domestic gold market, supports this contention.
China is taking concrete steps toward reintroducing gold to the world as a core component of monetary, trade, and global economic stability.  Given China’s economic heft, particularly in the realm of natural resources, this is bullish for gold and puts a very strong patron squarely in the yellow metal’s corner.
In this context, we believe that gold generally, and the shares of gold mining equities in particular, are deeply undervalued.  To help us separate the wheat from the chaff, we developed our Gold Miners Comparative Analysis Table, which has a multitude of critical metrics to use in evaluating and comparing gold mining companies.
In the pages of our newsletter we educate our subscribers on what to look for when discerning between the different gold miners and guide them towards those that suit their individual appetites for risk.

Gold has been in a downturn for more than two years now, resulting in the lowest investor sentiment in many years. Hardcore goldbugs find no explanation in the big picture financial numbers of government deficits and money creation, which should be supportive to gold. I have an explanation for why gold has been down—and why that is about to reverse itself. I'm convinced that now is the best time to invest in gold again.

Gold Is the Alternative to Non-Convertible Paper Money

Asia Is Accumulating Gold for Good Reason

In 2013, China imported over 1,000 tonnes of gold through Hong Kong alone, and it's likely that as much gold came through other sources. For example, last year the UK shipped 1,400 tonnes of gold to Swiss refiners to recast London bars into forms appropriate for the Asian market.
China mines around 430 tonnes of gold per year, so the combination could be 2,430 tonnes of gold snatched up by China in 2013, or 85% of world output.
India was expected to import 900 tonnes of gold in 2013, but it may have fallen short because the Indian government has been taxing and restricting imports in a foolish attempt to support its weakening currency. Smugglers are having a field day with the hundred-dollar-per-ounce premiums.
Other central banks around the world are estimated to have bought at least 300 tonnes last year, and investors are buying bullion, coins, and jewelry in record numbers. Where is all that gold coming from?

COMEX and GLD ETF Inventories Are Down from the Demand

The chart below shows the record-low supply of registered COMEX gold.
Meanwhile, SPDR Gold Shares (GLD), the largest gold ETF, lost over 800 tonnes of gold to redemptions. At the same time, central banks have provided gold through leasing programs (but figures are not made public).

Why Has Gold Fallen $700 Since 2011?

The gold price quoted all day long comes from the futures exchanges. These exchanges provide leverage, so modest amounts can be used to make big profits. Big players can move markets—and the biggest player by far is JPMorgan (JPM).
For the first 11 months of 2013, JPM and its customers delivered 60% of all gold to the COMEX futures market exchange; that, surely, is a dominant position that could affect the market. By supplying so much gold, they are able to keep the price lower than it would otherwise be.
A key question is why a big bank would take positions that could drive gold lower. Answer: Banks gain by borrowing at zero rates. But the Federal Reserve can only continue its large quantitative easing programs that bring rates to zero if gold is not soaring, which would indicate weakness in the dollar and the need to tighten monetary policy. Voilà—we have a motive. Also, suppressing the price of gold supports the dollar as a reserve currency.
The chart below shows the month-by-month number of contracts that were either provided to the exchange or taken from the exchange by JPM. For a single firm, the numbers are large, but the effect across all gold markets is greater because so many gold transactions follow the price set in the paper futures market.
What jumps out from the chart above is the fact that while JPM had been selling gold into the futures market for most of the year, it made a major shift in December, absorbing 96% of all gold delivered.
That is a radical shift and, I believe, an indicator that JPM's policy has shifted. In my opinion, their deliveries of gold were suppressing the price during 2013, but now their policy has shifted in a way that will support gold going forward.
This leaves a vital question unanswered: Why? Has the motivation to suppress the price of gold gone away? Not likely, and we may never know the full truth of what is happening, but I suspect the main reason for the shift is that they have done their damage. The $740 drop from top to bottom, a 39% decline, has shaken confidence in gold as a financial "safe haven" among many investors, especially those new to precious metals. At the same time, continuing to lean on gold at this point could become very costly. JPM delivered $3 billion (about 2 million ounces of gold) into the market up to December in 2013, and may not have ready sources of gold to keep that up. It is dangerous to put on big short positions unless you have gold or some future gold deliveries as a hedge.
By now, everyone knows of the shortages in the gold market; JPM has to be as aware of that as the rest of us. It just isn't safe for them to continue to lean on the market. Being aware, it looks like they are taking the bet that gold will rebound, so they could do well on the other side of the trade.
Another confirmation of the shift by big banks comes from data provided by the US Commodity Futures Trading Commission (CFTC) that shows the net positions of the four biggest US banks in the futures market. There has been a dramatic change from being short the market to now being long.

Crisis Brewing in the Gold Market

So why can't Germany get its gold? Explanations of having to melt down existing gold and recast it just don't make sense. The most logical conclusion, and the one I've come to, is that the United States simply doesn't have the gold it says it has—neither Germany's nor its own.
Of course, the US government isn't going to admit that there's a problem, but I say there is.
More evidence: JPMorgan's COMEX warehouse contained 3.0 million ounces of gold in 2012, but that had dropped to 0.5 million ounces by mid-2013. Its registered inventories are a razor-thin 87,000 ounces. These kinds of swings are indicative of shortages and instability.
Further, JPMorgan sold its gold vault in New York City—located next to the Federal Reserve's vault—to the Chinese. The banking giant also just announced the sale of its commodities trading business (although it may not have sold the precious metals part of that business). Perhaps they were concerned about new regulations of banks with deposit insurance from the government.
In another relevant development, Deutsche Bank recently surprised the gold community by quitting its position on the committee that sets the London a.m. and p.m. fixings. This came a few weeks after a German regulatory body called BaFin started investigating how these prices were set. BaFin also gave an indication that the process appeared worse than the LIBOR fixing scandal, which resulted in billions in fines.

Putting Inventories and Traders Together

The chart below gives a dramatic picture by simply dividing the open interest of all futures contracts by the registered inventories. The black line at the bottom shows the big jump in the ratio as the registered inventories declined. There are 107 times more open-interest positions than there is registered gold.
The futures markets operate on the expectation that only a few big traders will demand delivery. JPMorgan has shown that it is in a position to demand almost all (96%) of the gold for delivery. They are big enough that they could cause a collapse of the market, if they were to force delivery of more than is available. They know better than to do so, though, and I would guess that they will just manage to try to gain back what gold they have been delivering over the last several years. That should support the price of gold.

Gold Will Rise, and It's on Sale Now

Last week we released a report that looked in to the depths of the Shanghai Gold Market. In the report we revealed the volumes that pass through the exchange as well as the huge amounts of delivery taking place.
We concluded that the SGE would not yet be a force for competition when it came to the New York and London Gold powers of price discovery. But it could, however drive that wedge between the paper and physical gold market.
We now ask who it is that is driving this wedge and are they consistently buying up, or selling down, gold. So we turn our attention to those who are participating in this market.
In our previous article we outlined the levels of participation on the Shanghai Gold Exchange. We quoted the Chairman and President of the Exchange who said, ‘though institutional clients are still the most important participants in the market the market share of individual investors has soared in recent years.’ The graph below is not just institutional investors but those who were make up the top ten market participants. However as our research shows, individuals barely touch the trades coming from institutions.


Since 2011, the following names have dominated the top ten total gold trading table on the Shanghai Gold Exchange. We have calculated the data in the following tables and graphs by taking each of the SGE’s top ten tables for total gold trading, buying and selling. We have then taken the amounts (in kg) each member traded across the months and worked out a percentage representation of the total volumes traded in the 30-month period.
The data shows which institutions feature and account for more than 1% of volumes of the ten largest traders, and also what percentage of activity they accounted for withinthe ten largest traders. There were approximately 45 institutions featured.

Total gold trading

It is clear that whilst individual investors may well be taking up more room on the exchange, there are a few major institutions who represent the lion’s share of the volumes, namely Bank of China and ICBC.
In terms of total gold trading, Bank of China accounted for over 21% of the largest ten members’ activity between January 2011 and June 2013. They were swiftly followed by ICBC and ICBC Personal.

	% proportion of top ten active members in total gold trading
Bank of China	21.78
ICBC Personal	13.23
ICBC	6.32
China Gold	6.32
Agricultural Bank of China	5.92
Construction Bank	5.59
Shanghai Pudong Development Bank	4.98
Societe Generale personal	4.12
Shandong Mining	3.54
Minsheng Bank	3.32
Bank of Communications	3.03
Bank of Shanghai	2.93
Zhaojin Group	2.70
Individual	1.58
ANZ	1.32
Industrial Personal	1.26
Shanghai Banking	1.14
Zijin Mining	1.13

NB: Due to putting SGE data through Google Translate there seemed to be a difference between ICBC and ICBC personal. There may also be some misnamed institutions

Individually ICBC and ICBC Personal accounted for 13.2% and 6.3% (respectively) of total gold activity in the period covered. If, as we suspect, they are the same organisation then they still fail to overtake Bank of China.
Note, no foreign banks make it into the top five of those who accounted for the most activity on the exchange. Societe Generale account for less than a fifth of Bank of China’s total activity. ‘Individual’ we take to mean non-institutional and they top the only other foreign institution, ANZ, in terms of activity on the exchange.

Whose buying gold?

When it comes to the ten largest participants in the buy side of the market on the exchange the story hasn’t changed by much. The Bank of China continue to lead the race, accounting for over 17% of the volumes from the ten largest traders going through the exchange in the last 30 months. Once again ICBC and ICBC personal quickly follow up the Bank of China, with 14.7% and 7.12%, should these two be combined then they overtake Bank of China by a significant percentage, over 4%.

	% proportion of top ten active members (bid)
Bank of China	17.88
ICBC Personal	14.75
ICBC	7.12
Societe Generale personal	5.85
Shanghai Pudong Development Bank	5.36
China Gold	4.81
Construction Bank	4.35
Agricultural Bank of China	4.17
Chinese Gold	4.15
Zhaojin Group	2.78
Old Phoenix	2.59
Shandong Mining	2.42
Bank of Communications	2.36
Bank of Shanghai	2.28
ANZ	1.97
Shenzhen Greenery	1.86
Shanghai Bank	1.69
Shenzhen Public Hang Lung	1.41
Industrial Bank	1.21
Minsheng Bank	1.20

However, one thing that is interesting to note is that Societe Generale has a larger presence in the buy side of the market, than it does in overall volumes.
Meanwhile on the sell side of the market Bank of China dominate once again, with 23% with ICBC Personal quickly following them with over 13%.

	% proportion of top ten active members  (Offer)
Bank of China	23.68
ICBC Personal	13.29
Agricultural Bank of China	7.23
Construction Bank	5.91
Societe Generale personal	5.32
Minsheng Bank	5.09
Shandong Mining	4.61
ICBC	4.48
Shanghai Pudong Development Bank	3.30
Shanghai Bank	3.28
Zhaojin Group	2.62
Bank of Communications	2.52
China Gold	2.46
Zijin Mining	2.01
Bank of Shanghai	1.58
Industrial Bank	1.50
ANZ	1.35

Just to give you a quick insight into the changes in those participating on the exchange we bring you three snapshots of the top ten largest traders in the buy-side of the gold market over the last 30-months.

Interestingly the Bank of China has fallen a position in each year, accounting for less and less of the total bid each time. Whilst 2013’s data only accounts for 6-months, the difference in total bid participation between now and 2011 has fallen by over 6%. In contrast ICBC has managed to climb positions.
Another interesting point of note is that both Societe Generale and ANZ have fallen out of the top buyers this year. In fact, ANZ does not feature at all in the 2013 data.

Concluding remarks

As we said previously in our opening comments, we do not believe that the Shangai Gold Exchange is in a position to impact the international gold price in a dominant way quite yet.
However, it is interesting to take note of who the main players are in this market. Given the power JP Morgan et al are said to have in the paper gold market and the price of gold, we suspect their Chinese contemporaries are also going to be significant in the future. Particularly as we suspect pushing up the value of the dollar will not be at the top of their remit.

Source : http://therealasset.co.uk/traders-chinese-gold-market/

One question that has not been asked sufficiently is, “How can China buy well over 2,000 tonnes of gold without sending the gold price rocketing?”

Investors got less bullish on gold as hedge funds doubled their short holdings just before prices erased a weekly loss and Janet Yellen pledged to press on with economic stimulus if confirmed as Federal Reserve chairman.
The net-long position in gold slumped 37 percent to 55,456 futures and options in the week ended Nov. 12, U.S. Commodity Futures Trading Commission data show, the biggest drop since February. Short bets climbed to 54,143, the highest since mid-August, from 26,490 a week earlier. Net-bullish wagers across 18 U.S.-traded commodities dropped 12 percent to 576,224 contracts as investors became more bearish on wheat and cut their silver holdings by the most in five months.
Gold is heading for the first annual loss since 2000 after some investors lost their faith in the metal as a store of value. Global equities advanced to the highest in almost six years last week and U.S. inflation is running at 1.2 percent, half the rate of the past decade. Bullion reached a record in 2011 as the Fed pumped more than $2 trillion into the financial system. Gold rallied as Yellen said Nov. 14 she’s ready to back stimulus until she sees robust economic growth.
“People were feeling very bearish before Yellen’s statement,” said Donald Selkin, who helps manage about $3 billion as the New York-based chief market strategist at National Securities Corp. “Her comments were dovish and can be seen as a postponement to tapering, which is definitely helpful for gold. But, the main reasons why gold has fallen are intact. Inflation is low, and equity markets continue to march ahead.”

Gold Rebound

Futures tumbled 3.7 percent in the five sessions before Yellen’s testimony before the Senate Banking Committee. Prices rebounded 1.5 percent in the next two days, erasing the week’s losses and capping the biggest two-day rally since Oct. 22. Eighteen analysts surveyed by Bloomberg News expect prices to gain this week, nine are bearish and two neutral, the largest proportion of bulls since Oct. 4.
Gold slumped 23 percent this year on the Comex in New York, heading for the biggest annual loss since 1981. The Standard & Poor’s GSCI Spot Index of 24 commodities fell 4.6 percent. The MSCI All-Country World Index of equities gained 18 percent, while the Bloomberg Dollar Index, a gauge against 10 major trading partners, rose 3.1 percent. The Bloomberg Treasury bond Index lost 2.3 percent.

Central Banks

The U.S. economy and job markets are performing “far short of their potential,” and the Fed will ensure monetary policy isn’t removed too soon, Yellen said. The comments echo other monetary officials working to combat stagnant economic growth. The European Central Bank cut its key rate on Nov. 7 in a bid to prevent slowing inflation. The same day, Czech policy makers said they were intervening in the currency market for the first time in 11 years to weaken the koruna.
Gold rose 70 percent from December 2008 to June 2011 as the Fed expanded its balance sheet through debt purchases, fueling expectations of accelerated inflation and a weaker dollar. President Barack Obama nominated Yellen, the bank’s vice chairman, last month to succeed Chairman Ben S. Bernanke, whose term expires Jan. 31.
Investor appetite for the precious metal waned this year as inflation failed to accelerate and the S&P 500 Index of shares reached all-time highs. Global bullion demand tumbled 21 percent last quarter as investors pulled 118.7 metric tons out of exchange-traded funds and similar products, World Gold Council data show.

Inflation Expectations

Inflation expectations as measured by the break-even rate for five-year Treasury Inflation Protected Securities fell 14 percent this year.
Global gold ETP holdings slumped 29 percent this year, reaching the lowest since 2010 last week, while more than $64 billion was wiped from the value of assets, data compiled by Bloomberg show. Prices fell 33 percent since reaching a record $1,923.70 in September 2011.
“The danger for gold is it’s in the middle of a significant bear market move, rather than having completed one,” said Michael Shaoul, chairman and chief executive officer of Marketfield Asset Management LLC, which manages $17 billion. “I don’t think Yellen has said anything of any consequence. We all knew she was dovish, and the market had worked out what she would say.”
Billionaire hedge fund manager John Paulson, who cut his gold holdings by more than half in the second quarter, maintained his bet on the metal over the next three months as prices rebounded, government data showed last week. Bullion rose 8.4 percent in the third quarter, the first gain in a year.

Paulson View

Paulson & Co., the largest investor in the SPDR Gold Trust, the biggest exchange-traded product for the metal, held 10.23 million shares as of Sept. 30, unchanged from June 30, according to a government filing on Nov. 14. Billionaire George Soros took a stake in the Market Vectors Gold Miners ETF.
The risk of “high inflation in the future” makes gold a desirable long-term investment, Paulson & Co. has said. The view contrasts with Goldman Sachs Group Inc.’s Jeffrey Currie, who has said bullion is a “slam dunk” sell in 2014. The bank forecast prices at $1,100 in 12 months in an Oct. 18 report.
Bullish bets on crude oil fell 4.3 percent to 223,733 contracts, the lowest since June, the CFTC data show. West Texas Intermediate fell 0.8 percent to $93.84 a barrel, the sixth weekly decline and the longest stretch of losses in 15 years.

Crude Supplies

U.S. crude-oil stockpiles climbed for an eighth week as output expanded to the highest since January 1989, data from the Energy Information Administration showed. Horizontal drilling and hydraulic fracturing, or fracking, have unlocked supplies in shale formations in North Dakota, Texas and other states.
Speculators turned bearish on copper, with bets on price declines outnumbering wagers on gains by 8,117 contracts in futures and options. That’s the first time investors turned net-short since Sept. 17. Copper futures slumped 2.2 percent in New York last week, the biggest drop since late August.
A measure of speculative positions across 11 agricultural products was little changed at 362,838 contracts, up 0.1 percent from a week earlier, the CFTC data show. The S&P’s Agriculture Index of eight commodities tumbled 20 percent this year.
Money managers held a net-short position in wheat of 47,251 contracts, compared with 19,535 a week earlier. Investors have been betting on price declines for corn since June, and are also bearish on coffee and soybean oil. Cotton holdings fell to the lowest since December and cocoa wagers fell last week for the first time since July.

Record Crops

U.S. farmers will collect a record harvest of 13.989 billion bushels of corn this year, the Department of Agriculture said on Nov. 8. Global coffee output will exceed consumption for a fourth season in 2014, the longest glut in 11 years, the USDA estimates.
“The fundamental issue of oversupply for several commodities is a reality,” said Rob Haworth, a senior investment strategist in Seattle at U.S. Bank Wealth Management, which oversees about $110 billion of assets. “We saw some temporary interest come into commodities because of Yellen, but we don’t think the story has changed. The Fed will have to slow the stimulus at some point.”