2024年11月8日星期五
2024年10月27日星期日
隨著西方投資者突然轉向黃金，重大轉變被揭示出來
在過去的兩年裡，東方對黃金價格的重大上漲負有責任，使其與西方的定價模式脫模。 但西方投資者收回了接力棒，自2024年6月以來一直在推動黃金走高。
令人憚動的是，西方投資者也在放棄他們舊的定價模式。 他們現在不是出於投機原因參與黃金市場，而是將黃金作為避風港購買。 這是非常看漲的，因為華爾街幾乎沒有黃金的曝光率。
與此同時，以淨值計算，東方沒有賣出。 在這個緊張的市場中，金價正在急劇上漲：今年至今，黃金價格已經上漲了30%以上。
黃金價格是由邊緣買家驅動的
黃金價格的設定通常由全球黃金從西向東流動決定，反之亦然。 出於幾個原因，瞭解誰是邊緣買家（定價者）實際上很重要。
識別邊緣買家為金價上漲或下跌的原因提供了背景資訊。 從歷史上看（在過去的100年裡），西方的機構供求關係定了價格，而東方透過在牛市買入或在熊市買入來降低波動性。
正如東方最近所表明的那樣，它也可以成為黃金市場的驅動力，這樣做的原因還沒有消失1。 如果我們同時看到兩個半球的持續買入，這將在黃金中產生一場完美的風暴。
東方的覺醒
在2022年底至2024年5月黃金的上漲期間，市場觀察家們很清楚，這不是由交易所交易基金（ETF）購買驅動的，因為ETF持有量在此期間有所下降。
這也不是由倫敦或瑞士的場外交易購買引起的，因為這兩個交易中心都是淨出口商。 在2022年之前，ETF庫存將膨脹，當金價上漲時，英國和瑞士將淨進口。
隨著黃金與2022年10年期國債通脹保護證券（TIPS）收益率脫鉤，一些新的事情正在發生。 雖然從長遠來看這沒有什麼意義2，但從2006年到2022年初，西方交易員更喜歡TIPS收益率來定價黃金。
在很大程度上，由於地緣政治緊張局勢和金融條件的惡化，中國和沙特央行——以及在較小程度上，中國、泰國和土耳其等私營部門——正在推動黃金上漲。
從2022年初到2024年第二季度，央行總共購買了2500噸，根據我的研究，其中中國人民銀行購買了1600噸，其沙特同行購買了160噸（如此處和此處所述）。
在此期間，東方負責黃金市場。
西方投資者又回來購買黃金了
自去年6月以來，黃金價格一直在上漲，黃金ETF庫存上漲，倫敦金條市場的所在地英國已經變成了淨進口國。
圖表1。 每月持有的西方黃金ETF。 世界其他地區的ETF持有量僅佔黃金ETF總量的6%。
此外，黃金價格再次與TIPS收益率相關四個多月。 但從本月開始，這種相關性正在崩潰，而西方繼續成為價格上漲的驅動力。
圖表2。 截至2024年10月18日，TIPS收益率與黃金價格相比。
圖表3。 自6月以來，藍點一直在形成一個新的對角雲，重申了舊的TIPS模型以更高的價格，儘管在10月，該模型被中止了（紅色橢圓形）。
與此同時，東方的黃金需求已經放緩。 上海黃金交易所的溢價從7月開始呈負值（並且仍然是），中國進口最近幾個月有所下降，印度也是如此。
全球指標表明西方重新掌管市場。
緊張的黃金市場
黃金市場還沒有完全恢復到2022年之前的樣子。 東方對世界上最大的煉油中心瑞士的恥辱（正如我們在2022年之前在金價上漲時看到的那樣）此後再也沒有發生過。 我的看法是，在最近的一次上升中，東方正在喘口氣，但它還沒有買完。
圖表4。 淨金流經瑞士的地區。 自2022年第二季度以來，儘管價格上漲，但東部對瑞士的淨值並沒有不光彩。
雖然從6月到8月，英國一直是黃金的淨進口國，導致黃金價格上漲，但在這段時間裡，英國向中東和亞洲國家淨流出。
圖表5。 英國的黃金淨進口量及其與東方的淨流量。 許多ETF在倫敦儲存實物黃金。 根據Goldchartsrus.com的資料，英國約35%的淨流量可以歸因於ETF的囤積和不囤積。
西方投資者在市場緊張的情況下購買黃金，使價格迅速上漲。
華爾街正在購買黃金作為金融保險
每當西方將黃金價格與TIPS收益率掛鉤時，黃金進入市場主要是出於投機原因。 投機者不是瞄準，例如，10%的黃金分配，而是評估實際利率（TIPS收益率），並決定黃金是做多還是做空。 歸根結底，這些投機者只關心在價格方向3上進行有利可圖的賭注。
現在，西方投資者已經從這種模式轉向，金價正在上漲。 這表明他們正在改變他們對黃金的看法，即從投機貿易轉變為金融保險。
圖表6。 截至2024年10月18日，GLD庫存與黃金價格。
透過使用西方最大的黃金ETF（GLD）的每日資料作為區域情緒的代理，我們可能會得出結論，西方投資者仍在推動黃金上漲。 請注意，這並不意味著西方投資者都購買ETF等衍生品；他們也直接購買黃金。
黃金前景仍然樂觀
2023年，美國銀行（BofA）的一項調查顯示，71%的美國投資顧問建議在0到1%之間進行黃金分配，這幾乎不算什麼。
此外，他們的建議自2017年以來一直沒有改變，儘管消費者價格通脹已經上升到幾十年來的高點，兩場戰爭爆發了，西方凍結了俄羅斯3000億美元的外匯儲備，美國的財政政策已經失控。
這些發展使具有交易對手風險（並且可以無限印刷）的金融工具不那麼受歡迎，這支援擁有實物黃金的情況。
圖表7。 由BofA提供。
在世界黃金理事會（WGC）2024年6月對北美投資者的調查中，一些不擁有黃金的機構表示，他們的障礙之一是“其他大型機構沒有投資黃金。” 華爾街顯然低估了黃金，當所有實體登船並將其投資組合的很大一部分分配給黃金時，價格上漲的空間很大。
幾天前，美國銀行的一位戰略家諷刺地表示，黃金似乎是最後的“避風港”資產地位，激勵包括中央銀行在內的交易員增加風險敞口，因為隨著美國債務水平的上升，國債面臨風險。
“人們對美國資金需求及其對美國的影響的擔憂揮之不去。 美國銀行寫道：“國債市場，黃金屬可能會成為最終的避風港資產。”
總之，讓我們透過研究信貸和黃金之間的長期比率來關注推動黃金的主要原因。
這種方法背後的理由是，當創造過多的信貸時，金融體系會變得不穩定，金價需要上漲，為金融體系增加更多信任並恢復穩定。
圖表8。 美國官方黃金儲備由廣義美元貨幣供應量（M2）劃分。
過去，每次美國貨幣黃金價值與美元貨幣供應量之間的比率觸底——這意味著相對於政府擁有的黃金，為其貨幣提供可信度，創造了大量信貸——黃金牛市隨之而來。
類似的信用黃金比率表明，我們正處於黃金牛市的第一局。 我們將在即將發表的文章中深入分析這些長期比率。
筆記
- 地緣政治緊張局勢（戰爭和美元武器化）、高債務水平、高昂的股權估值和貨幣貶值。
- 對我來說，TIPS模型一直是不合邏輯的，因為它將名義價格與以百分比計價的利率聯絡起來。 鑑於TIPS收益率適用的美國公共債務總額的增長速度比地面黃金供應快得多，我不明白這種模式是如何可持續的。
- 請注意，黃金市場比上面建議的要大。 現在在倫敦的邊緣買家設定了市場其他部分（礦山供應、珠寶和硬幣需求等）清算的價格。 當黃金與TIPS收益率相關時，投資者可以增加他們的頭寸，但不能增加規模。
2024年10月23日星期三
Silver’s secret military demand: The hidden force driving price growth
(Kitco News) – Silver is finally coming to life after months of sideways trading and being overshadowed by gold’s record run of new highs, but with the gray metal now trading above $34, one hidden source of demand could propel silver to a new all-time high in the not-too-distant future.
As reported by The Jerusalem Post, silver’s uses in consumer electronics and renewable energy have been extensively covered, but its applications within the secretive realms of military and aerospace technology are less discussed.
“Recent analysis suggests that military usage of silver may be substantially greater than any other industry category, including electronics, solar panels, and investment demand combined,” the report said. “This information, brought to light by silver market experts, raises significant questions about the transparency of silver demand data and the potential impact on future silver prices.”
While central banks and large asset managers regularly report on silver inventories, purchases, and sales, the report noted that “five U.S. government agencies, including the Department of Defense, Department of Energy, Department of Interior, and the U.S. Geological Survey, have collectively stopped reporting on silver inventories since 1995-1996.”
Due to the secrecy of these operations and the assumption that other such developments have occurred under the guise of “black projects,” many in the precious metals community have grown wary of government-sourced data regarding the usage of the gray metal.
This includes its application in creating rockets and missiles, bombs and shells, fighter jets, satellites, tanks and submarines, torpedoes, night vision goggles, communication devices, radar systems, space technology, and nuclear technology.
As often cited by Andy Schectman, a renowned expert in the precious metals market and a regular interviewee with Kitco News, there are 500 ounces of silver in the tip of every tomahawk cruise missile, but the total amount used by the DoD is never reported, suggesting that demand for defense applications could be far higher than what’s assumed.
“The hidden military demand for silver could potentially outpace industrial applications as we progress through time and technology advances,” the report said. “Escalating geopolitical tensions and potential conflicts may drive this increase, making silver's role in military applications increasingly significant. This shift could have a substantial impact on the overall silver market, potentially influencing prices and supply dynamics.”
Some of the properties of silver that make it particularly appealing for military uses include its conductivity, antimicrobial properties, corrosion resistance, reflectivity, and heat conductivity, they noted.
“It is important to note that the military's demand for silver is classified, and there is limited public information available on the specific applications of silver in military equipment,” they added. “However, the properties listed above are likely to be among the most important factors driving the military's demand for silver.”
When combined with the known industrial uses – which include solar energy and photovoltaics, medical applications, photography, soldering and brazing alloys, battery technology, semiconductors, touch screens, and water purification – analysts argue that the price of silver could rise meaningfully in the years to come as the available supply gets absorbed by the growing number of use cases.
“Industrial uses account for more than half of annual silver demand worldwide over the last five years,” they noted. “The biggest consumers for industrial applications include the US, Canada, China, India, Japan, South Korea, Germany, and Russia.”
With the U.S. heavily reliant on silver imports, importing 6,500 million tons of silver in 2021 and currently getting 79% of its silver from outside sources – including 47% from Mexico and 23% from Canada between 2017 and 2020 – many see it as suspect that silver was “conspicuously absent from official critical materials lists published by the U.S. Department of Energy and the U.S. Geological Survey in 2022,” the report noted.
“Neither silver nor gold made the cut,” they added. “This absence has sparked debate, as silver’s strategic importance continues to grow across multiple industries, with demand surging globally.”
“With silver’s critical applications and growing industrial demand, many experts question whether its exclusion might warrant a reassessment,” the report said.
Indeed, this topic has become increasingly prominent in recent months as multiple countries have moved to label silver as a strategically important metal.
As reported previously by Kitco News, a draft copy of Russia’s federal budget indicates that the Russian government is looking to expand its holdings to include silver and platinum group metals.
“The formation of a reserve of refined precious metals as part of the State Fund of Russia will help ensure a balanced federal budget and stable economic development, as well as meet the industrial needs of the Russian Federation in the event of an emergency,” the Ministry of Finance was quoted in an article by Interfax, translated to English from Russian.
According to a report from Chinese media, “This is also the first time that Russia has explicitly mentioned silver as one of its reserve assets in its budget plan, indicating that silver is beginning to occupy an important position in Russia’s strategic resource reserve planning… As an energy powerhouse, Russia has a significant impact on world resource prices. Given the current turbulent international situation and stronger expectations for inflation in the future, other countries may also follow suit, which will undoubtedly generate strong demand for precious metals.”
The report added that while “silver, platinum, and palladium have remained severely undervalued in historical periods,” and “although the short-term impact on the market is not significant, from a long-term perspective of three to five years, these severely undervalued assets happen to have more investment value.”
And regarding the ongoing BRICS summit and reports indicating that the bloc plans to launch BRICS pay this coming Thursday, the Chinese media report said, “If this new payment system is linked to assets such as gold and silver, it will increase the monetary attributes of these precious metal assets, thereby also driving up the prices of precious metals such as silver.”
“One of the reasons Russia is now deploying reserves to metals like silver, platinum, and palladium is that these all have military applications,” wrote X user Weimar Silver Pilgrim. “It’s technically unknown, but most missiles are said to contain 10-20 oz of silver apiece.”
“In a STUNNING move, Russia's central bank has just become the 1st in recent times to announce #silver purchases,” noted X user Make Gold Great Again. “With only 3 oz of above ground #silver per human, other central banks better hurry before this #SilverSqueeze trend goes VIRAL AND STOCKS RUN OUT. Overheard by one uber-chic bank Chairman: ‘Silver is THE must-have central bank accessory this fall.’”
“Been saying BRICS/East has a very different historical relationship with silver than the West.
And now, Russia announced plans for silver,” added X user Graddhy. “Silver´s journey to become a part of the new coming global monetary system has now started, and it will drive the 3rd bull move.”
Both China and India have also been making strategic moves relating to silver, in what some have suggested is a calculated move by the two largest countries by population to drain the West of its silver reserves in response to years of price suppression, with many pointing to silver’s use in military applications as the impetus behind U.S. efforts to keep its price at lower levels.
As for the implications for the silver market, the report suggested that “The combination of significant military demand and diverse industrial applications could have profound implications for the silver market.”
“With substantial demand from both military and industrial sectors, the silver market may be tighter than previously thought,” they said. “ As awareness of total demand grows, it could drive silver prices higher. Silver's strategic importance in military and industrial applications may lead to increased government interest in securing supplies. And Questions arise about the accuracy and completeness of official silver demand data.”
“The true strategic importance of silver in military and industrial applications may be far greater than publicly acknowledged, making it a critical resource for national security, technological advancement, and industrial growth,” the report concluded. “The interplay between military demand, industrial applications, and investment interest will likely shape the future of the silver market, potentially leading to a significant revaluation of this versatile and indispensable metal.”
2024年9月24日星期二
Nations in the mBridge Project Are Stockpiling Gold, Driving Up Prices
Countries that participate in the novel cross-border payments system mBridge are each hoarding gold and are largely responsible for the bull market of the past two years.
How and when the global dollar standard will disintegrate is hard to predict, but setting up a non-dollar payments system (mBridge) and aggressively accumulating gold to replace U.S. Treasuries as the prime international reserve asset is a potent strategy to de-dollarize.
mBridge: An Instant Cross-Border Payment System
MBridge is an international payments project that was launched in 2021 by the Bank for International Settlements’ (BIS) Innovation Hub in Hong Kong. Currently, there are five full members—Thailand, China, Hong Kong, Saudi Arabia, and the U.A.E.—and over 30 observing members.
The project aims to create a multi-central bank digital currency platform for participating central banks and commercial banks, built on distributed ledger technology (DLT) to enable instant cross-border payments and settlement. MBridge uses an Ethereum-compatible DLT network, the mBridge Ledger, developed by China’s Digital Currency Research Institute. Because China oversees the backbone of the technology, it’s immune to Western sanctions.
A common technical infrastructure has the potential to improve the current system and allow cross-border payments to be more efficient, immediate, and cheaper. On June 5, 2024, mBridge reached the Minimum Viable Product (MVP) stage.
A Surge in Gold Hoarding by mBridge Members
Readers who are familiar with my writings understand that the gold price is determined by global flows. Based on cross-border trade statistics, it’s clear that the East assumed dominance in the gold market starting in 2022, overtaking the West.
As stated in a previous article, formal gold import and export statistics represent private flows, but they can also reflect central bank activity. Aside from elevated peaks in private demand from China and Thailand, the Chinese and Saudi central banks (PBoC and SAMA) are largely responsible for the rally that commenced in 2022, both having vigorously stepped up gold purchases after the West froze part of Russia’s foreign exchange reserves.
Strikingly, according to available trade data, the countries in the driver’s seat of the gold market are all full members of mBridge: China, Saudi Arabia, Thailand, and Hong Kong (see chart below). Statistics by the U.A.E. lag several years and are misleading due to smuggling to India.
Chart 1. Net gold import data through May 2024 reveals gold stockpiling amid higher prices.
Chart 2. The Treasury Inflation Protected Security (TIPS) yield is the expected real interest rate on U.S. government bonds. Strong gold buying by the East has broken the correlation and rendered TIPS impotent.
Between China, Thailand, Saudi Arabia, and Hong Kong, it’s clear their gold stance has changed since early 2022: they’ve jettisoned their sensitivity to the price. Instead of selling into rallies, they are themselves causing those rallies as a result of strong demand.
Aside from visible global gold flows, we know the official gold reserves of Thailand, the U.A.E., China, and Saudia Arabia are rising in recent years—even when excluding covert purchases by the latter two. Only Hong Kong’s monetary gold has been flat; however, it can be lumped in with Beijing since it’s a special province of China.
Chart 3. The Central Bank of Thailand has increased its reserves to 235 tonnes from 84 tonnes in 2008. In the U.A.E., official gold assets went up from zero to 75 tonnes over this time span. PBoC and SAMA gold reserves are much higher than disclosed.
mBridge Helps Facilitate a Ditching of the Dollar
The dollar is said to be the world reserve currency, which means it’s the most used currency in global trade. The lion’s share of global international reserves (owned by central banks) are held in dollar-denominated assets such as U.S. government bonds (USTs). Nations wanting to break free from the dollar need an alternative for trade and reserves.
As described above, the members of the mBridge fellowship—all running a current account surplus—have been increasing their gold reserves in recent years. This is referred to as Gold Recycling: storing trade surpluses in gold rather than USTs.
Chart 4. A visualization of the Gold Recycling trend. World official gold reserves are estimated based on reported and unreported purchases by central banks.
Getting rid of the dollar in trade is more challenging. Liquidity in local currencies can be poor; volatility can be risky with limited hedging opportunities, transactions slow and expensive, and payment infrastructures incompatible.
MBridge is about connecting central banks to provide a settlement layer for their digital currencies while supporting interoperability between participants’ existing financial infrastructures. Utilizing mBridge is a stepping stone for more use of local currencies and, eventually, an improvement of liquidity.
Courtesy of BIS Innovation Hub (2022). Saudi Arabia was the last member to join in June 2024.
Cross-border payments often rely on an inefficient network of correspondent banking. Through mBridge, though, its participants seek to do away with correspondent banking and let banks link up efficiently through the new settlement rails. According to the BIS, mBridge payments are faster, safer, cheaper, and more accessible, and settlement is final.
Courtesy of the Hong Kong Digital Currency Academy.
mBridge Facilitates New Non-Dollar Trade Deals
Energy is the lifeblood of any economy, and Saudi Arabia and China are the largest exporters and importers of oil, respectively. For a long time, the House of Saud preferred to receive dollars in return for oil, based on an agreement with the United States to invest its trade surplusses in USTs*. Despite their long-standing ties with the U.S., the Saudis are becoming eager to trade oil in other currencies.
In November 2023, the PBoC and SAMA signed a currency swap agreement worth ¥50 billion yuan ($7 billion dollars) to “expand the use of local currencies between China and Saudi Arabia and facilitate trade and investment between the two sides.”
This September, the Saudi Minister of Mineral Resources, Bandar Alkhorayef, said in an interview with SCMP that he’s open to new ideas, including the use of renminbi in crude oil settlements. No wonder the Saudis joined mBridge in June.
The PBoC also renewed a currency swap line with with the U.A.E.’s central bank (CBUAE) in November 2023 and, at the same time, solidified a digital currency cooperation agreement as part of ongoing teamwork for mBridge.
As it has reached the MVP stage, mBridge is slowly becoming fully operational. A few weeks ago, as an example, RAKBANK in the U.A.E. executed its first instant cross-border payment—digital dirham against digital yuan—using mBridge.
In May 2024, representatives of the Thai central bank and the PBoC signed a Memorandum of Understanding “on strengthening banking and financial cooperation, including the promotion of local currency usage as well as cross-border payment and settlement,” an apparent reference to mBridge.
The Combination of Gold & mBridge Could Tank the Dollar
What are the odds that the countries that have taken over the gold market in the past two years are also in a non-dollar trade alliance? Surely, these countries have a thought-out plan to de-dollarize.
Noteworthy, China, Hong Kong, and the U.A.E. have sophisticated precious metals markets where gold is traded in local currency, allowing mBridge associates to convert any surpluses from bilateral trade directly into gold while bypassing the dollar.
Saudi Arabia doesn’t have a developed gold market, but not long ago, a new refinery was opened in Riyadh under the patronage of the Saudi Minister of Mineral Resources, Bandar Alkhorayef. On the refinery’s website, it reads gold bars will “comply with globally approved standards and should be accepted globally by all customers, including all national banks.” That should tell us enough.
One requirement for mBridge to come to fruition is the completion of the digital local currencies, most of which are currently still in a pilot phase. It should be clear, though, that mBridge constituents are being finalized and coming together.
MBridge is likely to become a success because there is a political motive to escape from the clutches of the weaponized dollar if the mBridge group is able to take over the gold market, who knows what they can do on the cross-border payments front?
As we keep track of developments in cross-border payments through local currencies, the rise of gold to the detriment of the dollar in global reserves is inescapable.
Global Gold Reserves Flipping from Dollars into Gold
My personal calculations suggest gold is currently making up 19% of international reserves, up from 10% in 2014. Meanwhile, the dollar’s share has fallen from 62% in 2001 to 48% in March of this year as a result of the Gold Recycling trend (see charts 4 and 5).
Chart 5. Gold is taking over market share from the dollar in global international reserves.
Since geopolitical tensions aren’t subsiding and the mBridge group has a motive to de-dollarize, we can assume this trend will continue. And we shouldn’t rule out Western investors will join in driving up the price of gold.
The dollar won’t die overnight, yet its slow demise is worth evaluating relentlessly**. I will keep readers posted on the composition of international reserves and developments in the cross-border payments arena.
*A “petrodollar” deal in which the Saudis exclusively accept dollars for oil has never existed between the U.S. and Saudi Arabia.
**Not mentioned in this article is that there is also a lot of dollar debt internationally due to the Eurodollar market.
Bucking Gold Repatriation Trend, Argentina Sends More Gold to London
In July, the Central Bank of Argentina (BCRA) shipped another 3 tonnes of gold to the U.K. to swap for foreign exchange. A month prior, BCRA also transported 3 tonnes to the U.K. BCRA is now estimated to have 37 tonnes (60% of Argentina’s gold reserves) on swap in the London Bullion Market.
Argentina Is Leveraging Its Physical Gold
Argentine newspaper Clarín reported in 2017 that BCRA moved 11 tonnes of its monetary gold to London, according to their research, to be swapped out for Japanese yen. “We are already doing this with all the gold we have in London, because by placing it in that financial center, we can expand its use,” the central bank told to Clarín at the time.
El País reported in July of 2024 that BCRA was again transporting gold abroad. After rumors were making rounds about how much gold was shipped out and to where, President Milei hinted that the gold was used overseas as collateral for a loan (this is how a swap typically works). Argentina appears to be in need of foreign currency to pay interest or to pay off debt.
Argentina Sends More Gold to London
A few weeks back, I was able to confirm BCRA had sent $150 million worth of gold (3 tonnes) to the U.K. in June, based on cross-border trade statistics. Because officials had confessed that part of the Argentinian monetary gold was sent abroad, and for the first time ever the U.K.—home of the largest gold market globally—recorded to have imported 3 tonnes from Argentina that month, I was confident this batch could be assigned to BCRA.
Monetary gold can cross borders outside the scope of customs statistics, which apparently happened in 2017. However, if a central bank lets a bullion bank take care of the shipping, the bullion bank has to deal with customs, and the gold will show up in trade data (as was the case with the secret purchases by Saudi Arabia’s central bank in recent years).
In the same spirit, new trade data from the UK shows another import of 3 tonnes from Argentina for July. It looks like BCRA is sending more and more gold to London in a desperate need for foreign exchange.
Most of Argentina’s Gold Is Now Held in London
Bloomberg recently wrote that, according to its sources: “before the move, about half of Argentina’s gold was in domestic vaults with the other half in London.” Bloomberg speculated there was only one shipment of gold to Europe, which would be the one in June.
So, before June, half of BCRA’s total gold reserves (62 tonnes) were in London. Adding 6 tonnes transferred in June and July means there are now 37 tonnes abroad, which equals 60% of Argentina’s monetary metal.
If Milei succeeds in getting Argentina’s finances in order, international debt can be repaid and foreign exchange obtained through trade can be used to unwind the swaps. If not, BCRA could default on its swap obligations and thereby surrender ownership of 36 tonnes of precious metal.
Saudi Central Bank Caught Secretly Buying 160 Tonnes of Gold in Switzerland
he Saudis have joined other Asian countries in ditching their long-term sensitivity to the gold price. Evidence suggests the Saudi central bank has been covertly buying 160 tonnes of gold in Switzerland since early 2022, contributing to the current gold bull market.
Although the Saudis played a key role in the birth of the global dollar standard in the early 1970s, this time around they might even become a lynchpin for its dissolution.
Introduction
Until recently, Saudi Arabia’s gold demand would decline when the gold price went up and strengthen when the price went south. This dampened volatility in the gold market, which for many decades was ruled by the West.
Ever since the West immobilized Russia’s dollar assets in February 2022, those with diplomatic disagreements with the West are increasingly exchanging their dollars for physical gold. Saudi Arabia is the latest country—after China and Thailand—of which I have found cross-border trade statistics showing it has shifted from being price sensitive to a price driver.
As
the chart above reveals, when the gold price went up (2016, 2017, 2019,
and 2020), the Saudis cut back imports or became net exporters. Since
2022, however, the gold price has escalated, yet Saudi Arabia continued
to import gold.During the entire rally from late 2022 until present, the Saudis have been a constant net importer which has boosted the gold price. The icing on the cake is that part of the flow into Saudi Arabia, the gold coming from Switzerland, actually goes to the Saudi central bank, aka the Saudi Arabian Monetary Authority (SAMA).
Exposing Saudi Central Bank’s Hidden Gold Buying
Formally, any country’s cross-border gold trade statistics refer to “non-monetary” metal, meaning privately owned. Monetary gold—owned by central banks—is exempt from being disclosed in trade numbers. As I have demonstrated in a previous article, though, the non-monetary gold crossing the Chinese border is often a shipment heading for the vaults of the People’s Bank of China (PBoC) regardless.
Among industry insiders, SAMA is known for having accelerated secret gold purchases since 2022. By comparing the World Gold Council’s (WGC) estimates of total central bank buying (based on field research), to what central banks report to have bought to the International Monetary Fund (IMF), we can conclude “unreported” purchases went through the roof starting in 2022. People familiar with the matter, but who prefer to stay anonymous, told me this is largely due to the PBoC, and to a lesser extent SAMA. That’s clue number one.
The gap between WGC and IMF data reflects unreported purchases.Because gold Exchange Traded Funds (ETFs) hardly exist in Saudi Arabia, we can estimate SAMA purchases by comparing net imports to local consumer demand. Not coincidentally, net imports began to consistently outpace consumer demand in the second quarter of 2022, right after the Ukraine war started. SAMA was (and is) in a hurry to get its hands on physical gold.
Discrepancies
between consumer demand and net imports can also arise from dealer
inventory changes and scrap supply, data that is unfortunately not
publicly available.A source once told me that central banks often buy gold in Switzerland and London and have bullion banks pack and ship the gold to wherever the central banks want. This way it shows up in cross-border trade data because the bullion banks have to deal with customs.
Switzerland Pinpointed as Ground Zero for Secret Purchases
To find out if SAMA shops for gold bars in the Swiss Alps, I have subtracted Saudi consumer demand from its net imports and compared the outcome (gold imported but not sold to consumers) to gross exports from Switzerland to Saudi Arabia. The result shows a strong match since Q2 2022, confirming SAMA has quietly been buying gold in Switzerland.
Any
differences between the blue and orange bars is mainly due to scrap
supply, a draw on net imports, which likely was substantial in 2020.Saudi Arabia Owns Way More Gold Than It Wants Known
The data suggests SAMA bought approximately 160 tonnes of gold in recent years (and it was likely also buying in 2015 in Switzerland). How much it holds in total is unknown to me, partly because Saudi gold trade data only starts in 2015. What happened before that is up for grabs. Neither do I know how much additional gold SAMA might be buying elsewhere.
One thing is for certain: Saudi Arabia owns much more gold than it wants the world to believe.
The last time the Saudi central bank updated its official gold reserves was in February 2008, when it conveyed to hold 332 tonnes, which was 180 tonnes more than in January 2008. Obviously SAMA didn’t buy 180 tonnes in one month.
Past
and current data indicate Saudi Arabia central bankers do not report
changes to their gold holdings in a timely fashion. What will their next
bulk update show?Just like the reported gold reserves by the PBoC, the number put out by SAMA is purely political. By hiding how much precious metal the nation truly owns, the House of Saud avoids openly upsetting the United States.
But the evolution of countries in Asia storing more and more of their trade surpluses in gold—a time-tested neutral and sanction proof reserve asset—is clear. Next to 160 tonnes by SAMA, I calculate the PBoC bought 1,600 tonnes since the war in Ukraine. Both central banks, the former of the most influential country in the oil market and the latter of the second largest economy globally, must be confident in what direction the gold market is headed.
How the above ties into other concerted initiatives by Asian nations to bypass the U.S. dollar, we will discuss in the next article.
2024年9月17日星期二
2024年8月1日星期四
PBoC Gold Conduit Revealed—Chinese Central Bank Did Not Stop Buying Gold in May
This article is an analysis of how the Chinese central bank (PBoC) buys gold in London from Western bullion banks. Because the bullion banks take care of the gold transport for the PBoC, the shipments from London to Beijing are disclosed in UK customs data. The customs data reveals that the PBoC continued to buy gold in May—when it communicated to the market it discontinued buying—at a rate of 53 tonnes. The PBoC stated it stopped buying to dampen the gold price so it could acquire more gold.
People's Bank of China headquarters in Beijing.
Several months ago, I discovered that supply in the Chinese gold market was outstripping demand. During my investigation of this anomaly, I found circumstantial evidence that led me to conclude the surplus is imported in 400-ounce bars from the United Kingdom, and surreptitiously procured by the PBoC.
Let’s go through some of the mechanics of the global gold market before we can stitch it all together.
PBoC Gold Buying Hidden in Plain Sight
In global customs data—officially called International Merchandise Trade Statistics (IMTS)—all gold disclosed is “non-monetary,” meaning not owned by a monetary authority such as a central bank. In the United Nations IMTS rulebook it reads that customs data excludes monetary gold:
Since monetary gold is treated as a financial asset rather than a good, transactions pertaining to it should be excluded from international merchandise trade statistics.
Though, someone familiar with the matter but who prefers to stay anonymous, shared with me that gold import and export data can relate to monetary gold. Commonly, central banks will buy gold from Western bullion banks that arrange transportation and insurance of the metal. The moment these banks ship the gold from the UK it is thus non-monetary bullion, but when it arrives in China it is monetized (changes ownership) and brought to vaults of the central bank, supposedly in Beijing.
Exports from the UK are mainly from the wholesale gold market in London where virtually all bars traded weigh 400 ounces. The retail market in Britain dealing in smaller bars pales in comparison, and the refining industry in the UK is relatively small.
In turn, at the core of the Chinese domestic gold market, which excludes Free Trade Zones (FTZs), is the Shanghai Gold Exchange (SGE) where predominantly 1Kg gold bars are traded.
Chart 1. In the entire history of the SGE large 400-ounce bars have hardly ever traded. The most traded product on the SGE is the 1Kg 99.99 fine physical contract.
The private sector in China trades 1Kg bars through SGE, while the central bank buys “large bars” (400-ounce bars) abroad. As all gold on the SGE is traded in yuan, the PBoC can only diversify its international reserves by buying gold overseas with dollars or other foreign exchange. Aside from logic, there are multiple sources that have made clear the PBoC doesn’t purchase gold on the SGE. For example, the World Gold Council (WGC, page 9), the SGE (page 4), and it was confirmed to me personally by an ex-gold trader from a Chinese state-owned bank.
The SGE captures the lion share of all gold trading in the Chinese private market. There are rules and incentives that steer most supply—imports, domestic mine production, and recycled metal—towards the SGE, which for liquidity reasons attracts most demand. Hence, the gold withdrawn from the SGE vaults is often used as a proxy for Chinese wholesale demand. In a formula:
SGE withdrawals = net import + domestic mine output + recycled metal
Chart 2. Apparent Chinese gold supply and demand.
Before 2022, gold supply and demand in the Chinese market matched. SGE withdrawals were always higher, to varying degrees, than net import plus domestic mine output, the difference being gold recycled through the central bourse.
If it were true that bullion banks ship gold to China, as non-monetary gold visible in customs data, that doesn’t flow into the SGE system, we would see a discrepancy between apparent Chinese gold supply and SGE withdrawals. As more gold would be supplied to China than sold through the SGE. In a formula:
SGE withdrawals < net import + domestic mine output + recycled metal
Chart 3. Starting in 2022 there has been an increase in months wherein net imports alone are higher than SGE withdrawals.
Indeed, both in 2022 and 2023 China’s net import plus mine output transcended SGE withdrawals (let alone if we would add recycled gold).
Chart 4. In 2022 and 2023 apparent supply was higher than demand (SGE withdrawals).
As we shall see, the surplus in the Chinese gold market—imports that are not sold through the SGE—is being absorbed by the PBoC.
Readers with deep knowledge of the Chinese gold market might think: “what if the large bars are refined in FTZs and loaded into SGE vaults without being withdrawn?” I checked with a source that has connections to refineries in China, and according to this person the refineries don’t use any large bars as feedstock for producing 1kg bars for the SGE*. Another contact I have, close to the SGE, shared with me that SGE inventory in April 2024 accounted for about 300 tonnes. Inventory had gone up recently together with a rise in the price of gold, this person said. However, the increase in SGE inventory can’t make up for the surplus in the market, which is at least 400 tonnes according to my calculations.
More Data Supporting the Thesis
By comparing estimated central bank purchases by the WGC, based on field research, to official statistics regarding gold buying by central banks, we know that since the start of the Ukraine war, in February 2022, monetary authorities in aggregate are secretly buying much more than they report. I have written before that these covert purchases can be attributed for roughly eighty percent to the PBoC.
Chart 5. Total estimated central bank gold buying by the WGC, versus official statistics by the International Monetary Fund (IMF). The difference reflects covert acquisitions.
“Unreported” PBoC gold purchases exploded when $300 billion in foreign exchange reserves from the Russian central bank were frozen by the West early 2022 due to the war. Notably, the UK began exporting 400-ounce bars to China in huge tonnages at the same time. Coincidence? I think not. Ever since, China has taken over gold price control from the West and broke the gold price’s correlation with “real rates” (10-year TIPS yield).
Chart 6. The UK’s direct export to China is likely destined for the PBoC.
Chart 7. The US dollar gold price versus the 10-year TIPS yield (real rates). Early 2022 the correlation broke because of, inter alia, massive PBoC purchases.
The final clue is that there is a relationship between what the Chinese central bank officially reports to be accumulating, and gold exports from the UK to China. What frequently happens, exposed by comparing these numbers, is that the PBoC starts buying gold a few months before it tells the world about it, and severely underreports its additions. This was the case in 2015, 2019, and 2022.
Chart 8. Official data on PBoC gold buying versus UK gold exports to China. Previous exports from the UK for the PBoC were not large enough to create an apparent surplus in the Chinese gold market.
Conclusion
It all fits and makes sense: the motive, the data, and the anecdotal evidence. Let’s summarize our key findings:
It all points towards UK gold exports to China are destined for the PBoC—although probably not every ounce of these flows is for the Chinese central bank. Clearly, the PBoC is accumulating more gold than it wants to disclose.
When the PBoC stated it had stopped buying gold in May 2024, after continuous purchases for 18 months, I didn’t believe it. The PBoC has few reasons to cease growing its gold reserves in the current geo-political and monetary landscape with a plethora of challenges.
Click on the image to view the tweet on X.
Probably, the PBoC wants the most gold for its dollars, so when the price rises fast it will signal it stopped buying, trying to cool the market. In the meantime, the United Kingdom exported 53 tonnes to China in May, of which likely most found its way to Beijing.
Note, the PBoC also buys in Switzerland and other countries, flows that can be included or excluded in customs reports, but it’s impossible, from where I stand now, to measure all these separately.
Finally, some of my previous analyses have been skewed by the above. Private demand in China has been lower because some (“non-monetary”) imports were taken by the central bank.
Notes
*This person’s intelligence doesn’t mean refineries in Chinese FTZs can’t be refining any 400-ounce bars into smaller ingots. It probably happens, but not on a grand scale.
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