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China Gold Imports Surge - Or Fall. You Decide
Chinese gold imports are becoming a case study in the power of journalists to control the slant of a story by deciding which facts to highlight. The following chart contains the relevant data.
Here's how the mainstream press, in this case Bloomberg, handled it:
Net imports totaled 83.6 metric tons last month, compared with 91.9 tons in December and 19.6 tons a year earlier, according to calculations by Bloomberg News based on data from the Hong Kong Census and Statistics Department today. Exports to Hong Kong from China declined to 19 tons in January from 34.8 tons in December, the Statistics Department said in a separate statement. Mainland China doesn't publish such data.
And here's how MineWeb's Lawrence Williams handled the same story:
Statistics are how you read them and China both imported 326% more gold from Hong Kong in January than it did a year earlier, or 9% less than in the previous month.
Lies, damn lies and statistics! Take the headline above and compare it with the Bloomberg headline for effectively the same story using exactly the same figures which was: China's Gold Shipments From Hong Kong Decline as Demand Weakens. Both headlines are absolutely correct based on the figures but you wouldn't believe so from reading them, indeed you could be forgiven for thinking one of them is obviously a downright lie. It just depends which way you care to spin it and some recent Bloomberg headlines do seem to have tended towards negativity with regard to Chinese gold imports.
Consider the facts. According to the Bloomberg interpretation of the latest gold import and export figures from the Hong Kong Census and Statistics Department, the special administrative region exported a net 83.6 tonnes of gold to the Chinese mainland in January. As Bloomberg rightly notes this is a fall - albeit a fairly small one - of around 9% from the 91.9 tonnes in December - so far so good. But gold trade between Hong Kong and Mainland China can be seasonal so perhaps the better comparison should be to compare this with the net exports from Hong Kong to mainland China in January last year - which came to a very low 19.6 tonnes - hence the 326% rise noted in theMineweb headline. Incidentally Hong Kong net gold exports to the mainland were 96.7 tonnes in December 2012 - so the December figures for 2012 and 2013 were broadly comparable, but the January ones certainly were not!
What can one surmise from that? Perhaps not a lot, although there are continual anecdotal stories in the press of huge demand in China by individuals for gold from shops which sell the precious metal in various forms. By any standard, 83.6 tonnes of gold is a lot of the yellow metal. To put it in perspective it's 3.7 tonnes more than the world's 37th largest holder of gold, Australia, holds in its total central bank reserves, and given that most over the counter gold purchases in China are in grammes rather than kilos or tonnes - and 83.6 tonnes equates to 83.6 million grammes, that suggests a huge number of Chinese are still stocking up on gold. So if this represents a weakening in demand, as the Bloomberg headline suggests, then the gold investors should still be happy with that interpretation despite its overall downbeat connotations.
What can be gleaned from the figures is that gold demand in the runup to the Chinese New Year remained strong. Historically December is a strong month for Chinese gold imports as traders stock up ahead of the Lunar New Year holiday, and it usually slips back in January, but this year was somewhat different with demand obviously remaining strong right through January. Rather than taking month on month figures perhaps one should look at December and January combined as a guide to real demand over the holiday, and this may well have been exceptional. Imports into the mainland through Hong Kong ahead of this New Year holiday thus totalled 175.5 tonnes, whereas that immediately ahead of last year's New Year holiday was a mere 116.1 tonnes, suggesting that demand in this Year of the Horse was actually over 50% greater than a year ago! You can make of these statistics what you may, but to this observer it suggests that Chinese demand remains extremely strong.
Of course, as we have often noted here, it is believed that China imports gold through other ports of entry than Hong Kong too as the Shanghai Gold Exchange consumption figures remain consistently well in excess of the Hong Kong export stats. We should probably leave it to Koos Jansen and his very interesting In Gold we Trust website for further comment on what we believe to be the true figures for Chinese consumption.
Obviously, Williams gets it right. Chinese gold demand is highly cyclical, so comparing a relatively-weak month like January to a traditionally-strong one like December is like comparing pre-and-post-Christmas retail sales in the US; a big drop always occurs, so you can't read anything into sequential numbers. Instead, retail analysts look at year-earlier sales for a sense of the trend - and the mainstream media usually reports the year-over-year comparisons accurately. So they clearly understand the concept.
Why the difference with gold? Well, it's possible that the seasonality of that market isn't well-understood. And it's also possible that there's an institutional bias in shops like Bloomberg, where gold is seen as a commodity at best and a "barbarous relic (Keynes) or "old-fashioned money" (Krugman) at worst. So perhaps Bloomberg reporters are operating under editorial guidelines that call for gold to be shown in the least favorable light.
Whatever the cause of the misreporting, the fact is that China continues to pull gold away from Western central banks in increasing quantities, bringing us ever-closer to the day when the supply runs out.