China’s Appetite
for Gold: “Waning” or Surging? by John Rubino |
November 1, 2013
Bloomberg’s latest report on Chinese
gold imports is a great illustration of a journalist’s
power to shape a message by highlighting certain data points
and downplaying others. Here’s the article:
China Gold Imports From Hong Kong Fall
on Premium, Slow Demand
Gold shipments to China from Hong Kong fell for a second
month after the premium to take immediate delivery declined,
indicating waning physical demand in the nation poised
to become the largest consumer.
Net imports, after deducting flows from China into Hong
Kong, were 109.4 metric tons in September, from 110.2
tons a month earlier, according to Bloomberg calculations
based on data e-mailed from the Hong Kong Census and Statistics
Department. Still, the amount has more than doubled to
826 tons in the first nine months of the year, the data
show.
Gold prices dropped in September for the first loss in
three months amid speculation at the time that the U.S.
Federal Reserve would slow its $85 billion in monthly
bond purchases. The average premium that Chinese buyers
paid to take gold for immediate delivery in Shanghai fell
to $8.97 in September, compared with $13.57 a month earlier.
“Demand eased a bit in September as investment
in China remained sensitive to the gold price outlook,”
said Wang Weimin, an analyst at Dalian Fortune Futures
Co., before the announcement. “A lower premium was
a good indicator that Chinese investment demand slowed
after more sell-offs following the gold rout in April
and in June.”
Gold for immediate delivery in London traded at $1,323.91
an ounce at 10:18 a.m. Beijing time. Bullion, which dropped
as low as $1,180.50 an ounce on June 28, has declined
21 percent this year as investors reduced holdings in
exchange-traded products on prospects for a global economic
recovery.
Overtaking India
China’s total gold consumption this year may jump
29 percent to reach 1,000 tons, overtaking India to become
the world’s largest user, according to the World
Gold Council. China and India combined account for more
than half of the world’s demand, according to the
WGC.
Mainland buyers purchased 116.3 tons in September, including
scrap, compared with 131.4 tons in August, data from the
Hong Kong government showed.
China’s purchases in September were 67 percent higher
than the 69.7 tons a year earlier, according to the Hong
Kong data. Mainland China doesn’t publish such data.
Exports to Hong Kong from China were 6.9 tons in September,
according to the e-mail today, compared with 21.3 tons
in August and 28.2 tons in September 2012.
Bullion of 99.99 percent purity on the Shanghai Gold
Exchange fell for the first time in three months in September,
dropping 4.4 percent.
Now, despite including a lot of really
positive stats, the article’s clear message is that
Chinese gold demand is headed down. But the same data could
have driven a completely different slant. The title of the
gold-bug version might be “Chinese Gold Demand Remains
Robust,” and the introductory sentence “Chinese
September gold imports exceeded 100 tons for the seventh straight
month.” The article would then go on to highlight rather
than mention in passing the massive year-over-year growth
in demand.
And the gold-bug’s version would have included an
explanation of why readers should care about Chinese gold
demand in the first place. Specifically, how its imports
compare to what the world’s gold mines are producing
(nearly half) and how between them China, India and Russia
are vacuuming up all the gold flowing out of mines this
year, leaving the rest of the world’s gold buyers
to be satisfied from … where? That question would
dominate the last third of the article.
And last but not least there would be a catchy visual comparing
2013 monthly gold imports to 2012’s record levels.
Looking at this chart, the last word that comes to mind
is “waning.”
