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Published on Gold Anti-Trust Action Committee (http://www.gata.org)

Koos Jansen: Did China goose March gold imports to prepare for April smash?

By cpowell
Created 2013-12-27 01:02

8:10p ET Thursday, December 26, 2013

Dear Friend of GATA and Gold:

Gold researcher and GATA consultant Koos Jansen, perhaps the foremost expert on China's gold market, tonight reports data suggesting, as your secretary/treasurer speculated a month ago to King World News --

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/11/14_A... [1]

-- and directly to you --

http://www.gata.org/node/13256 [2]

-- that China helped arrange April's gold price smashdown so that it could get a lot of gold a lot cheaper.

Jansen discloses that there was "a huge spike" in gold imports by China from Hong Kong in March, "as if someone knew there was going to be immense demand for physical in April on the mainland."

Jansen writes:

Why would anybody import expensive gold in March to sell it for bottom prices in April? The answer: Chinese importing doesn't have to work like that. As I described in this article --

http://www.ingoldwetrust.ch/shanghai-gold-exchange-physical-delivery-equ... [3]

-- gold can be consigned by, for example, Hong Kong Shanghai Banking Corp. (HSBC) and Industrial and Commercial Bank of China (ICBC).

This is how it works: The consigner HSBC can ship the gold to the mainland without selling it at this stage. On arrival it has to be registered within seven days at the Shanghai Gold Exchange and move into the vaults. The gold is now merely transported, not sold.

The consignee ICBC will then ask HSBC for a quote in U.S. dollars per ounce (international spot) and then decide the offer price in renminbi at the Shanghai Gold Exchange. The Shanghai Gold Exchange premium is based upon freight costs, insurance costs, customs declaration fee, storage fee, ICBC's profit, etc.

After the gold is sold on the Shanghai Gold Exchange, ICBC must pay HSBC in dollars within two days and needs to let the State Administration of Foreign Exchange verify the payment.

I am aware that there was an arbitrage opportunity in early 2013 that could have explained some of the high volumes of gold trade between Hong Kong and the mainland. But this couldn't have explained the record net gold export just before the price dropped in April and the Shanghai Gold Exchange was stormed for physical gold.

Of course HSBC is custodian of the gold of the exchange-traded fund GLD, whose metal, as Jansen notes, seems to have been transferred steadily to China this year as Western ETF investors sold their shares.

Jansen's analysis is headlined "More on the West-to-East Gold Exodus" and it's posted at his Internet site, In Gold We Trust, here:

http://www.ingoldwetrust.ch/shanghai-gold-exchange-physical-delivery-equ... [4]

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.



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