Some Details on the Shanghai Gold Exchange

I found this to be very interesting detail on the operation of the Shanghai Gold Exchange. It was provided by comment at Dave's GoldenTruth site here.

The market is a hybrid of a physical and futures market.

I don't know if you are familiar with the operation of Shanghai Gold Exchange. The most frequently traded gold products are Au9999, Au9995 and Au(T+D). The most frequently traded silver product is Ag(T+D).

Au9999 and Au9995 are cash products. Au9999 is 1 kg of gold 99.99% pure and Au9995 is 1 kg of gold 99.95% pure. You just trade them like trading stocks.

Au (T+D) (the contract size is 1kg of gold no less than 99.95% pure) is similar to futures contracts but it does NOT have a specific delivery month. Delivery can take place every trading day. Between 15:00-15:30 (Beijing time, GMT+8) of every trading day, all the longs/shorts can submit their intentions to take/make delivery.

If there are more intentions to take delivery than those to make delivery, all the shorts of Au (T+D) must pay the longs Deferred Compensation Fee: short to long. If there are more intentions to make delivery than those to take delivery, all the longs of Au (T+D) must pay all the shorts Deferred Compensation Fee: long to short.

For example: http://www.sge.sh/publish/sgeen/sge_price/sge_price_daily/10378.htm

On Aug 21, 2013, 6,848 kg of gold was delivered for Au(T+D). There were more intentions to take delivery than make delivery. All the shorts of Au(T+D) had pay longs deferred compensation fee, short to long.

The Paying Direction of Deferred Compensation Fee is, IMO, more important than the amount of delivery.

The delivery of Au(T+D) is actually to change the names of the owner of the gold. The gold is still in the vault (usually a bank vault). The 6,848 kg of gold just changed owners. It is still in the vault(s).

The Shanghai Gold Exchange also publishes weekly and monthly reports. But in those reports, the definition of delivery is DIFFERENT. There, the SGE defines delivery as the amount of gold moved out of the vault(s).

For example, in the monthly report of July, the SGE reports that 235417.4 kg of gold was delivered. That means 235417.4kg of gold was moved out of the vault(s).

http://www.sge.sh/publish/sge/docs/20130812162935744053.pdf
(I can't find an English version for you)

As for silver, Ag(T+D) is the equivalent of Au(T+D). The contract size is 1kg of silver 99.99% pure. But since silver is not VAT free in China. Silver market participants usually choose not to make/take delivery of silver at the Shanghai Gold Exchange because making/taking delivery of silver at the Shanghai Gold Exchange is difficult to evade the VAT.

SP 500 September Futures Intraday

The futures made an intraday low of 1631.50 which is a tag on the 50% retracement and the bottom of the uptrending channel.

And they bounced hard off this.

Now we see if there is a follow through, with perhaps a retest, or a failed support and breakdown.

This Town: America's Gilded Capital

"Tim Russert is dead.
But the room was alive.

Big Ticket Washington Funerals can make such great networking opportunities. Power mourners keep stampeding down the red carpets of the Kennedy Center, handing out business cards, touching base. And there is no time to waste in a gold rush, even (or especially) at a solemn tribal event like this.

Washington—This Town—might be loathed from every corner of the nation, yet these are fun and busy days at this nexus of big politics, big money, big media, and big vanity. There are no Democrats and Republicans anymore in the nation’s capital, just millionaires. That is the grubby secret of the place in the twenty-first century. You will always have lunch in This Town again. No matter how many elections you lose, apologies you make, or scandals you endure.

In This Town, Mark Leibovich, chief national correspondent for The New York Times Magazine, presents a blistering, stunning—and often hysterically funny—examination of our ruling class’s incestuous “media industrial complex.”

Through his eyes, we discover how the funeral for a beloved newsman becomes the social event of the year. How political reporters are fetishized for their ability to get their names into the predawn e-mail sent out by the city’s most powerful and puzzled-over journalist.

How a disgraced Hill aide can overcome ignominy and maybe emerge with a more potent “brand” than many elected members of Congress. And how an administration bent on “changing Washington” can be sucked into the ways of This Town with the same ease with which Tea Party insurgents can, once elected, settle into it like a warm bath..."

Gold Daily and Silver Weekly Charts - B-O-R-I-N-G

The metals held their levels even while stocks took a fresh leg down on the usual kicks, bangs and thrills of the Federal Reserve and its endless taper talk.

August delivery is entering its last seven days, and so the action may pick up into its culmination next week. So far we have been very quiet, as most seasoned traders have taken off for their summer vacations in the European manner.

I will let you know if there are any big changes in COMEX inventory. But as I said, if a problem occurs it will not show up here first, since the COMEX has become largely a paper market.