Shanghai Silver Inventory Vs. Shanghai Silver Premium

There is a negative correlation between the Shanghai Silver Inventory and Shanghai Silver Premium to London Silver Spot Price.

Whenever the Shanghai silver inventory drops, this indicates that China is running low on silver, which means it will need to pay more money to get its hands on silver from the Western market, resulting in higher premiums between Shanghai and London.

For example, the peak in inventory in March 2014 (Chart 1) coincided with the bottom in silver premiums (Chart 2: blue line). The record low inventory in September 2014 coincided with the record high 11% silver premium.

Chart 1: Shanghai Silver Inventory

Chart 2: Shanghai Silver Premium

If you want to monitor the weekly inventory of silver at the Shanghai Exchange, you can go here.

Click on “weekly inventory” (by the way, these are real physical inventories, not imaginary inventories from the LBMA).

For example: 5-Sep-2014: Inventory of silver is 93304 kg.

China running out of silver

Very interesting development is that at this rate, China will run out of silver in the next two months.

 

That’s why we see the 11% premium at Shanghai.

 

I can’t predict what will happen when the first chart goes to zero, but it will be bullish for silver.

Harvey Organ explains what can happen when China runs out of silver. A gold price spike to 10000 USD/ounce overnight in December 2014. Silver will go to 200 USD/ounce. I’m of course very skeptical about this. But the more reason to monitor the Shanghai silver vaults.

https://youtube.googleapis.com/v/aZwSiHBxm0c&source=uds

If you want to monitor the weekly inventory of silver at the Shanghai Exchange, you can go here.

Click on “weekly inventory” (by the way, these are real physical inventories, not imaginary inventories from the LBMA).

For example: 5-Sep-2014: Inventory of silver is 93304 kg.

Hello, 10% Silver Premium

The Shanghai silver premium has almost reached 10% over the weekend.

 

Managed money shorts are again at highs in silver.

 

I think it’s safe to say now that silver is the best buy at this moment.

Precious Metals Premiums Down

I find it a little worrying for precious metals investors that the premiums in gold and silver are so low. I would refrain from buying gold at this particular moment, wait for the dip.

Silver coin premiums are down.

 Junk silver is down.

 Shanghai silver premiums are down.

 Shanghai gold premiums are negative.

 Gold coin premiums have been falling.

Comparing the China Gold Imports from Hong Kong Vs. Shanghai Delivery SGE

Let’s compare the two charts. The first one is the amount of gold deliveries to Shanghai gold exchange, or equal to the amount of gold withdrawn from the Shanghai Gold Exchange Vaults, which can be accessed here. The SGE withdrawal numbers in chart 1 is equal to Chinese imports and Chinese mine supply and is equal to Chinese demand for gold because all the gold is sold through the SGE. Note that January and December are the best months, because the Chinese have New Year in February.

Chart 1: SGE deliveries (original post) (Courtesy of Koos Janse, In Gold We Trust)

The second chart are the China gold imports.

Chart 2: China Net Imports from Hong Kong

Now let’s put them together. What do you see?

Chart 3: Chart 1 + Chart 2

First of all, the amount of gold withdrawn from the SGE is always higher than the net imports from Hong Kong to China. Chart 1 x 4 > Chart 2. That’s because SGE covers imports and Chinese mine supply.

Second, both charts go up in time, which means Chinese increasing demand is real. You can even predict what the Chinese gold imports from Hong Kong will be, just by looking at the weekly numbers from SGE.

Third, the SGE numbers are approaching world mine supply (yellow blocks), which means the Chinese are buying up all the gold that is produced in the world at this moment. The only way the Chinese can get a hold of this gold is by buying it from someone who is selling (aka The West).

Fourth, if you look at the imports as a ratio of SGE deliveries, the Chinese are importing more and more gold instead of producing it. A few years ago they only imported 10 tonnes a month on a SGE delivery of 60 tonnes a month. Now they are importing 100 tonnes a month on a SGE delivery of 160 tonnes a month. That’s an increase from 15% to 60%.

Fifth, now we come to the real interesting part. If we shift the two charts 4 months from each other. Then we see a perfect correlation. It means that when the SGE deliveries go up (Chinese demand goes up), then China needs to import more gold a few months later (imports from Hong Kong go up). The lag is about 4 months. This means we have a leading indicator for China gold imports from Hong Kong. I’m not sure about this correlation yet, we’ll see when we get more data in the following year. But it looks promising. That also means you should follow the SGE gold deliveries rather than following the China gold imports from Hong Kong. (Edit: correlation confirmed by Koos Jansen)

Chart 4: Chart 1 + Chart 2 Shifted 4 Months

Sixth, now it becomes even more interesting. Whenever the volume of delivered gold at the SGE goes up, the premium between Shanghai and London goes up. See Chart 5 peaks in June and December which coincide with the peaks from Chart 1. This also means that you can monitor daily the premiums on Shanghai and then predict the weekly delivered gold at the SGE.

Chart 5: Gold Premium Shanghai/London

Let’s recapitulate: In December, we see the gold premiums spike to 1.5%, which means there is a lot of delivery at the SGE (flowing out of GLD), which means Chinese gold demand is going up and that means that 4 months later we will see higher gold imports from Hong Kong.

Silver Smashdown Creates Record Silver Premiums in Shanghai

Yesterday’s attack in the precious metals sparked a record premium at the SGE. We got a new record of 6.73%. 

Not so much in gold… But even so, I’m sure that the $1200/ounce gold will be a level where central banks are very happy to take it from precious metal sellers. 

It’s amazing how the silver and gold premium charts differ from each other, it means that silver is in much higher demand than gold.

Silver Premiums Going Through The Roof

Just an update on something very interesting in the silver market. We already know the U.S. Mint is selling a lot of silver, but this is also visible in the premiums.

It occurred to me that we are seeing rising premiums again in some miners.

And we see the same thing at some bullion dealers, we are approaching new highs.

Not so much in junk silver.

But take a look at this. I first thought it was a miscalculation, but I checked it thoroughly. It was reality. In Shanghai we saw a major jump in silver premiums.

It will be interesting to see what the future will bring.

Shanghai Gold Premium Hit Another Record High

Almost each day marks another record high in Shanghai gold premiums to London spot price. We have hit 3% premiums.

They are really gobbling up the gold, that I can say.

Chart 1: Shanghai Gold Premium

Follow Up on Eric Sprott’s Bullish Call on Gold

As a follow up on Eric Sprott’s bullish call on gold here, let’s see what has happened ever since.

His premise was that hedge funds take possession of their physical gold of the GLD trust, because there isn’t any other gold available. As they take possession of this physical gold, they are going to sell it to China who give huge premiums on this physical gold (around 3%).

Following chart indeed says to us that hedge funds are still taking possession of their GLD trust units. The GLD now only has 969 tonnes of physical gold left. The question is now, how much physical gold does GLD really have? If someone knows, please tell me. But we have another way we can look at it, by just looking at how much registered gold there is on the COMEX.

Chart 1: GLD

If we look at the COMEX warehouses, registered gold (which represents 40 tonnes physical gold) is declining (blue chart on Chart 2). Total stock is declining too (around 200 tonnes). When these charts hit zero, there is no gold anymore at the COMEX and we will see defaults. The gold exchange will become a cash exchange.

Once the blue line intersects with zero, bad things will happen because no physical gold is available at the COMEX. I guess that when the blue line intersects, there is a chance GLD could blow up as people scramble to get physical gold at the GLD trust.

Chart 2: COMEX

Jim Sinclair confirms:

As long as physical gold remains at a premium above future that is above the cost of insurance and transportation, the lower the inventory of gold at the COMEX goes. A futures exchange without a warehouse inventory becomes a cash exchange. This is the emancipation of physical gold from the manipulative capacity of No-Gold, Paper – Gold

Now let’s see how this translates into the premiums on the Shanghai Gold Exchange.

Chart 3: Shanghai Gold Premium

As you can see on Chart 3, the premium has never been as high since I monitored it. We are at 2.8% now.

So investors are taking the opportunity to make arbitrage profits by buying gold from GLD and selling it to China at a premium.

Let’s see how long this can go on.

On the silver front, premiums have almost skyrocketed to 40% for some miners.

Chart 4: First Majestic Silver premium

Shanghai Gold Market Opens With a Boom

Shanghai Gold Market opens with a boom after the Dragon Boat Festival.

The gold premium jumped to 1.2%. 

For silver, Shanghai premiums shot up to 2.24%.