19 April 2013

Chinese Gold and Silver Exchange Has 'Almost Run Out of Available Gold Bullion' Awaits Imports

Hong Kong's century old Chinese Gold and Silver Exchange has reportedly almost run out of gold bullion at these price levels and is waiting for imports to come on Wednesday of next week from Switzerland and London. This information is from an April 19th interview.

Apparently they are not able to source from within their region which is a bit of a surprise since China is a major gold and silver producer.  Gold seems to be moving from West to East.

Why aren't they also going to New York for available bullion supply at the Comex?  

The Hong Kong Gold and Silver market seems to be more of what is called a 'bullion market' rather than a paper speculative market dealing in highly leveraged position trading with only small amounts of actual metal changing hands.
"The Chinese Gold and Silver Exchange Society operates in Hong Kong as a registered society. At present, we have 171 member firms which are sole proprietorships, partnerships or limited companies. Among these 171 firms, 30 are bullion group members. Bullion group members who want to manufacture good delivery bars may apply for the qualification of accredited refineries. Upon accreditation, these member firms may produce 99% fineness 5-tael gold bullions and 999.9% 1-kg gold bullions for delivery on the Exchange. The bullions they produce also circulate widely in the open market."
Please see the attached interview from Bloomberg Asia with the President of the exchange.

I do not want to make too much of this as it may be temporary. And since this is a metals exchange rather than a derivatives market a shortage of metal is not a default. A default is a paper promise to deliver that fails.

But it seems to call into question, if not shoot all to hell, the theory that the precipitous decline in the price of gold marked by the dumping of huge numbers of contracts into quiet markets was based on market fundamentals rather than brazen naked short selling and highly leveraged speculation in the London and especially New York markets, which both deliver only a fraction of the metals volumes which are traded on their exchanges.

And still hardly anyone is talking about the dog that didn't bark, and that is silver.

h/t to Delray and Liberty Mike

Sorry but I do not have any way to turn off the autoplay feature with the Bloomberg player. You will have to pause it yourself.