Shanghai Gold Exchange (SGE and SFE) gold and silver

[Peter89]

Silver bars of raw material of the largest state-owned silver seller Zhaokuang on http://JD.com is now at a price of ￥6.98/gram today, equivalent to $30.15/ounce

©Bai Xiaojun


$30/oz
raw silver should be of lower purity than lmba approved bars, i.e. lower price, i.e. under spot
$20?
that would be a 50% premium!

 

[Peter89]

All time high
The hottest selling gold bars on http://JD.com which is the largest e-commmerce hit all time high at a price of ￥511/gram today, equivalent to $2207.48/ounce.
10 gram gold bar

©Bai Xiaojun

 

[Peter89]

That could be indicative of other things like import restrictions, international transportation issues (costs, insurance, etc.), liquidity, etc.

...or... maybe difficulty in sourcing physical in the west to send east....

The transportation costs should be covered by the premiums
The only viable explanation for me are import restrictions.
The problem is, a) I can't find any info about such restrictions, and b) they would make no sense.

Difficulty in sourcing the metal at spot prices, yes, possible too

 

[pmbug]

...
The problem is, a) I can't find any info about such restrictions, and b) they would make no sense.
...

I remember back in September or so China was restricting imports and it caused a similar premium disparity. China, like India, tries to control gold imports. I think it has something to do with local money flow to foreign shores (affecting FX markets) or something.

 

[Peter89]

I remember back in September or so China was restricting imports and it caused a similar premium disparity. China, like India, tries to control gold imports. I think it has something to do with local money flow to foreign shores (affecting FX markets) or something.

Possible, but I still don't understand,
limiting imports they are making Chinese PM manufacturers and end users very unhappy,
their plan was/is to increase national PM reserves - both public and private,
if they want to internationalise their Yuan, they should be happy about money outflows

 

[nickndfl]

If left unlimited, gold imports would be so huge it would affect a large trade imbalance. India is also.closing loopholes on gold jewelry imports. I believe there is a 10% import tax on top of large premiums for gold.

 

[Peter89]

If left unlimited, gold imports would be so huge it would affect a large trade imbalance. India is also.closing loopholes on gold jewelry imports. I believe there is a 10% import tax on top of large premiums for gold.

So, in order to blow up West's PM pricing mechanism all they need to do is to lift their import limitations.

 

[searcher]

Chinese Buying Set the Stage for Gold’s Latest Record Run

(Bloomberg) -- This week’s gold rush may have been triggered by bets on the US Federal Reserve’s long-anticipated pivot to looser monetary policy, but the foundations for the record rally were laid in China.Most Read from BloombergThese Are the Best Countries for Wealthy ExpatsBillions Pour Into...

finance.yahoo.com

 

[Peter89]

!

 

[nickndfl]

Mark my words when the LBMA and COMEX are emptied premiums will skyrocket. No physical supplier will sell at lower western spot prices when they can get more from Lee Bang Chow.

 

[pmbug]

Mark my words when the LBMA and COMEX are emptied premiums will skyrocket. ...

 

[Peter89]

$3+ premium!

 

[pmbug]

12.4% Chinese premium. How high can it go?

 

[SilverSamurai]

Turmoil in China
Fiat failings everywhere
Sparks metal mania

 

[pmbug]

Talked to some people in China and this is what’s happening:

1) The Shanghai Gold futures at the Shanghai Futures Exchange (SHFE) is a paper market

2) Shanghai Gold Exchange (SGE) is physical Gold only market.

3) The Chinese are imposing transaction limits on the SHFE because they don’t want the paper Gold market dictating a speculative paper Gold price to the SGE physical Gold only market during a FOMO buying frenzy (of course the two prices are correlated).

4) This might push even more liquidity into the SGE physical Gold only market in the long run.

5) Meanwhile, Gold contracts volume should decrease at the SHFE.

 

[nickndfl]

12.4% Chinese premium. How high can it go?

Higher than a college kid on spring break in Jamaica.

 

[Peter89]

The Shanghai Gold futures at the Shanghai Futures Exchange (SHFE) is a paper market

As long as they require shorts to show proof of having the metal - i.e. as long as they prevent naked shorting -, it's not
imo

 

[searcher]

Figured this would fit in this thread better than the commodities thread. FWIW (dyodd)

Shanghai Taking Charge of Gold and Silver Pricing. New York and London Control Rapidly Evaporating

May 20, 2024 #market #trading #derivatives


21:35

 

[nickndfl]

Why do US banks sell so many naked shorts in the market often at incredible losses?

 

[pmbug]

Why do US banks sell so many naked shorts in the market often at incredible losses?

How do they make money? The answer is simple: volume.

 

[nickndfl]

They were buring losses.

 

[pmbug]

 

[pmbug]

Whoa. I skimmed that link (translated to English with Google Translate and it sounds like much more than just "insurance funds invest in gold". It sounds like they insurance companies are authorized to set up gold trading desks like a bullion bank. They even have to become members of the SGE. If I understood correctly, they aren't allowed to take physical delivery (to store physical gold). It sounds like China wants more liquidity in the SGE system.

Bold emphasis is mine. English text is from Google Translate:

...
I. The PilotMain elements

SinceDate of publication of this noticeFrom,PilotInsurance companies can allocate assets for the purpose of medium- and long-term assets,Pilot investment in gold.

(i) Pilot investment in gold.Gold Spots listed or traded on the Main Board of the Shanghai Gold ExchangeDiscContracts, gold spot deferred settlement contracts, Shanghai gold centralized pricing contracts, gold inquiry spot contracts, gold inquiry swaps and gold leasing business.

(b) Pilot participants.China People's Property Insurance Co., Ltd., China Life Insurance Co., Ltd., Taiping Life Insurance Co., Ltd., China Export Credit Insurance Company, China Ping An Property Insurance Co., Ltd., China Ping An Life Insurance Co., Ltd., China Pacific Life Insurance Co., Ltd., Taikang Life Insurance Co., Ltd., Xinhua Life Insurance Co., Ltd.

II. Pilot investment requirements

(i) Strict decision-making procedures. Pilot Insurance Companies Invest in GoldIt shall be considered and approved by the Board of Directors,andEstablish clear responsibilities and clear authorizationDecision-making authority,Develop reasonable assets according to asset allocation and risk management requirementsGoldConfigurationand investmentsThe strategy.

(b) Equipped with qualified staff. Pilot insurance companies should set up investment research, transaction delivery, risk control compliance, clearing accounting and other positions, so thatFront, middle and back.Strict separation of staff and responsibilities. .Pilot insurance companies shouldEquipped withGold investmentsPeople who are compatible with the size of the businessAmong them,Investment research and transaction delivery positions should be at least equipped2 people who pass the national gold trading level examination, risk control compliance, clearing accounting and other positions should be equipped with at least one person who passed the national gold trading level examination.

(C) the establishment of investment management system. Pilot insurance companies shouldEstablish a gold investment management system, including but not limited to authorized management, investment decision-making, research and analysis, transaction delivery, clearing accounting, information systems, internal control, risk management, related-party transactions, etc.. .

(D) improve the information management system. Pilot insurance companies should invest in gold by becoming members of the Shanghai Gold Exchange.Establish an information technology system that meets the technical operation specifications of the Shanghai Gold Exchange, through commercial banksAgentSeating is carried outWhere gold is invested, it should do a good job in docking with the system and accounts of commercial banks.Meet investment trading, accounting and risk management needs.

(5) Adhere to the concept of prudent investment.Pilot insurance companiesInvestment gold should be flexible to use large transactions, inquiry transactions, bidding transactions and other means.StagedCategory: BatchConstructionAvoid the impact on the market due to abnormal trading behavior.Pilot Insurance Companies Invest in GoldMonetary funds should be used, and the physical export and storage of gold shall not be handled.

(vi)Pilot Insurance Companies InvestmentsGold Spot Delayed Settlement ContractIt should be for the purpose of risk management or asset allocation to reasonably control the scale of business and prohibit the use of speculative arbitrage.. .

(vii)Pilot Insurance Companies InvestmentsGold Inquiries and Swap Contracts,Counterparty shall be limited to financial institutions, andmanagement of credit lines,PracticalPrevention of credit risk.Pilot insurance companies should strictly control the scale of swap business financing, integrate funds to prohibit investment in high-risk and liquid assets, and the short net exposure of the far end of the swap business should be lower than the gold spot assets held by the insurance company at any point.

(viii)Pilot insurance companies to carry out gold leasing business, counterparties should be limited to financial institutions, and reasonable control of counterparty concentration, single counterparty leasing scale shall not exceed the pilot insurance company holding gold spot contracts.20%.
...

More (it's in Chinese - I had to use Google Translate):
https://www.nfra.gov.cn/cn/view/pages/governmentDetail.html?docId=1198119&itemId=861&generaltype=1

 

[Voodoo]

That sounds like they are moving away from using Debt (ie US Treasuries) as the main holdings and moving to Gold. I guess people are forgetting that Gold doesn't pay interest.