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With London 'fix' under fire, China seeks bigger sway in gold trade


China has approached foreign banks and gold producers to participate in a global gold exchange in Shanghai ....


The Shanghai Gold Exchange (SGE) got the go ahead from the central bank last week to launch a global trading platform in the city's pilot free trade zone, a move that could challenge the dominance of New York and London in gold trade and pricing.....





SGE website: http://www.en.sge.com.cn/



AuTD1.png?id=11409261605 : x 4.96 : 252 = $1,250 / 253 = $1,255

GOLD - 100g (less volume) ------- : compare: Kitco Gold

Au100g0.png?id=11406031121 : t24_au_en_usoz_6.gif


> SGE - Site : http://www.sge.sh/publish/sgeen/index.htm


AG - T + D / Calculations

AgTD0.png?id=11409221917 : t24_ag_en_usoz_2.gif


AG-Shanghai : 4,200 RMB/kg (ct. is 15 kg)

/ CNY exch. Rate
/ 6.150 = $ 683 / 35.274 = $19.36 (I observed a discount of about 1% / 20 cents)


Gold- 3d


Silver- 3d


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China Looking To Dominate Gold Market With International ...
Forbes-27 May 2014
According to reports, the People's Bank of China has given the Shanghai Gold Exchange permission to build an international gold-trading ...

Not only is China the world’s top gold-producing and consumer nation but according to media reports, the country now has plans to become a major player in market pricing.

According to reports, the People’s Bank of China has given the Shanghai Gold Exchange permission to build an international gold-trading platform in Shanghai. The exchange has already contacted foreign banks including HSBC, ANZ, Standard Bank, Standard Chartered Bank and the Bank of Nova Scotia and invited them participate in a new international board.


China’s announcement to create an international price platform comes during a time of intense scrutiny of gold benchmarks. On Friday, the British regulator, the Financial Conduct Authority, fined Barclays Bank Plc GBP26 million for failing to adequately manage conflicts of interest between itself and customers, as well as “systems and controls failings,” connected to the London gold fixing.


Jessica Fung, commodity analyst from BMO Capital Markets, said that this move by the Chinese central bank appears to be extremely opportunistic.

“It is quite clear that the East is trying to dominate the market,” she said.

Ole Hansen, head of commodity strategy at Saxo Bank, agreed China is trying to capitalize on the turmoil in the London gold cash market as a result of the problems with the London gold fix.


Although the timing is opportunistic, Fung added that this is part of the Chinese government’s commitment to open up their markets. She pointed out that the Hong Kong exchange’s purchase of the London Metals Exchange last year is another example of how the country is slowly embracing international markets.

In August 2013, China surprised markets by giving approval to Australian bank ANZ and HSBC to trade gold futures on the Shanghai Futures Exchange.

Fung recently visited China and said the perception of domestic traders is changing and they are getting more comfortable and confident about the idea of trading in international markets.

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(Good timing? Start when the market is weak):


Meantime, COMEX Gold inventories fell fast last year
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Shanghai Gold Price (May 30, 2014) - Yuan


Variety-- : Open : -High- : -Low- : Close : chg.: Wt Aver. : Volume(Kg) : Amount (yuan). : Open Int. Delivery Volume

Au9995- : 253.00 253.00 252.00 252.75 : + 0.73 252.49 : --- 4,926 --- : 1,243,800,740.    

Au9999- : 254.80 254.80 252.30 252.80 : + 0.73 252.72 : - 13,549.30 : 3,482,563,016.   

Au100g :: 253.90 253.90 252.50 253.13 : + 0.85 253.04 : ------ 32.60 : ----- 8,249,152.    

Au(T+D) : 252.31 253.05 252.02 252.80 : -- 0.24 252.49 : - 28,082 --- : 7,090,544,300. : 138,984 : 7,234

mAu(TD): 252.21 253.10 252.21 252.80 : -- 0.32 252.64 : -- 1,875.80 : -- 473,912,216. : 091,384 : 3,022

Pt9995 - : 308.00 308.50 308.00 308.00 : + 1.52 308.09 : ------ 116 -- : --- 35,739,000. :   

Ag99.99 : 4160--- 4160-- 4100-- 4132--- : -- 26 - 4132-- : --- 2,610 -- : --- 10,785,000. : 174  

Ag(T+D) : 4026--- 4060-- 4026-- 4058--- : + 17 - 4044-- : - 1,073,624 : 4,341,820,336. : 4,622,150




> source -- : http://www.sge.sh/publish/sgeen/sge_price/sge_price_daily/12046.htm

> historical : http://www.sge.sh/publish/sgeen/sge_price/sge_price_daily/

> Sgehome : http://www.sge.sh/publish/sgeen/index.htm


Au-100gr : $253.13 // a ratio ?? : 1248 / $253 = 4.93


Calc- Check :: 253.13 x 100 x 3.5374 = CNY 89,542 per (10) ounces ??
CNY - FX : x 0.16
= USD == : $14,327 ???

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  • 2 months later...

Shanghai Silver Stocks - a squeeze can happen at any time now !






Here, you can see how drops in the Silver price have been associated with disgorging of

Silver Inventories from the Shanghai exchange. There's not much left !


Latest data shows: 137,677 kg. = 137.7 mt (Aug. 12, 2014)


Already this year, Shanghai has shed : 425 - 138 = 287 mt / 7 = 41 mt.

At that rate, there are only 3.4 months of inventory left. Which is already "dangerously low",

since Inventory cannot go negative. A short squeeze would normally occur in situations like this.

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Three More banks are now allowed to import Gold into China - say SCMP


+ StanChart, Shanghai Pudong, China Merchants

+ This brings the number to 15 banks

+ One of the banks said: "we will start importing soon"

+ SGE plans to launch three (new) physically backed gold contracts


China, along with Singapore, wants to see more local pricing of commodities

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  • 4 weeks later...

TWO Big Gold Stories out of China


The new International board will have Gold held in a tax-free warehouse - in Shanghai

It can be moved (at little cost) back and forth from the Int'l market.

And it will give China more impact in the international market.

As well as making the Rmb price more meaningful, more visible



Shanghai Gold Exchange's Intl Board to Start Trading Next Month

CRIENGLISH.com-Aug 25, 2014
The international board of the Shanghai Gold Exchange will start trading ... Inside sources say the board, which is located within the Shanghai ...
Shanghai Gold Exchange to Launch International Board on Sept. 29
Wall Street Journal-18 hours ago
An employee at a gold shop in Wuhan, Hubei province. Traders expect the Shanghai Gold Exchange's international board to broaden the ...



China Holds “Gold Congress” - Positioning Itself As Global Gold Hub, “In China, Gold Is Money”

Posted by : GoldCore
Post date: 09/11/2014 - 16:15
China Gold Congress in Beijing The China Gold Congress is currently in full flight in Beijing. The three day Congress is China’s biggest gold industry event of the year, drawing in participants from...
. . .
China’s gold market accounts for one third of global demand, and according to the WGC, is expected to grow another 20% cumulatively from now until the end of 2017.

In what is still a very centrally planned economy despite many market related reforms, nearly all reported gold activities in China flow through the Shanghai Gold Exchange (SGE) in one form or another.

Both the China Gold Association and the Shanghai Gold Exchange were established with government backing and their growth and success reflect a very deliberate pro-gold strategy on the part of the Chinese Government.

Even though the China Gold Association is a non-for-profit member association, it still primarily acts as a conduit and coordination group between the government and the gold producers.

The Shanghai Gold Exchange is the government’s second central hub in China’s gold market.

SGE approved refiners take in production from China’s fragmented gold mining industry and in imports from Hong Kong and other countries.

... we are going to see SGE and Comex going Head-to-Head


CME to launch gold futures contract in Hong Kong by ...
Reuters-20 hours ago
(CME Group Inc will launch a physically deliverable gold futures contract in Hong Kong ...
CME to Launch Hong Kong Gold Futures Contract
Wall Street Journal-16 hours ago
CME to launch gold futures contract in Hong Kong
South China Morning Post (subscription)-6 hours ago
=== ===
CME Group Inc will launch a physically deliverable gold futures contract in Hong Kong later this year to capture growing hedging and investment buying in the Asian region, a senior executive of the exchange said on Thursday.
The planned launch of CME's 1 kilogram (kg) gold contract comes as other exchanges in the region are racing to provide a viable alternative to the metal's global benchmark, which is under regulatory scrutiny.
. . .
Asia accounted for 63 percent of total consumption of gold jewellery, bars and coins in 2013, up from 57 percent in 2010, according to World Gold Council.
. . .
The launch of the Shanghai Gold Exchange's international bourse later this month will also be closely tracked by global investors as gold is one of the first commodities that China is opening up to foreign players by allowing them to participate directly in physical trading and to use offshore yuan. The bourse will launch three yuan-denominated physical gold contracts, of 100 grams, 1 kg and the bigger London gold delivery bar weighing 12.5 kg.
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Some Details on the Shanghai Gold Exchange --- 22 August 2013

I found this to be very interesting detail on the operation of the Shanghai Gold Exchange. It was provided by comment at Dave's GoldenTruth site here.

The market is a hybrid of a physical and futures market.


I don't know if you are familiar with the operation of Shanghai Gold Exchange. The most frequently traded gold products are Au9999, Au9995 and Au(T+D). The most frequently traded silver product is Ag(T+D).

Au9999 and Au9995 are cash products. Au9999 is 1 kg of gold 99.99% pure and Au9995 is 1 kg of gold 99.95% pure. You just trade them like trading stocks. Au (T+D) (the contract size is 1kg of gold no less than 99.95% pure) is similar to futures contracts but it does NOT have a specific delivery month. Delivery can take place every trading day. Between 15:00-15:30 (Beijing time, GMT+8) of every trading day, all the longs/shorts can submit their intentions to take/make delivery.

If there are more intentions to take delivery than those to make delivery, all the shorts of Au (T+D) must pay the longs Deferred Compensation Fee: short to long. If there are more intentions to make delivery than those to take delivery, all the longs of Au (T+D) must pay all the shorts Deferred Compensation Fee: long to short.

For example: http://www.sge.sh/publish/sgeen/sge_price/sge_price_daily/10378.htm

On Aug 21, 2013, 6,848 kg of gold was delivered for Au(T+D). There were more intentions to take delivery than make delivery. All the shorts of Au(T+D) had pay longs deferred compensation fee, short to long.

The Paying Direction of Deferred Compensation Fee is, IMO, more important than the amount of delivery. The delivery of Au(T+D) is actually to change the names of the owner of the gold. The gold is still in the vault (usually a bank vault). The 6,848 kg of gold just changed owners. It is still in the vault(s).

The Shanghai Gold Exchange also publishes weekly and monthly reports. But in those reports, the definition of delivery is DIFFERENT. There, the SGE defines delivery as the amount of gold moved out of the vault(s).

For example, in the monthly report of July, the SGE reports that 235417.4 kg of gold was delivered. That means 235417.4kg of gold was moved out of the vault(s).

http://www.sge.sh/publish/sge/docs/20130812162935744053.pdf / (I can't find an English version for you)

As for silver, Ag(T+D) is the equivalent of Au(T+D). The contract size is 1kg of silver 99.99% pure. But since silver is not VAT free in China. Silver market participants usually choose not to make/take delivery of silver at the Shanghai Gold Exchange because making/taking delivery of silver at the Shanghai Gold Exchange is difficult to evade the VAT.


> http://jessescrossroadscafe.blogspot.hk/2013/08/some-local-color-on-shanghai-gold.html

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In the next chart we can see the spread between Shanghai and London silver is declining in times of backwardation on the SHFE.




The spread can't be arbitraged as silver export from China enjoys 17 % VAT.



> https://www.bullionstar.com/article/another%20week%20of%20elevated%20gold%20demand%20in%20china

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Calculating Silver Premiums




====== : June 3 : June 4 : June 05 : June 6 // Sep12 :

Ag99.99: r 4,126 : r 4,096 : r 4,109 : r 4,085 // r 4,178 :

Prem.-- :: 8.66 % :: 8.10% :: 8.70% :: 6.40% //

Ag(T+D): r 4,032 : r 4,038 : r 4,040 : r 4,062 // r 4,116 :

Prem.-- :: 6.19 % :: 6.50% :: 6.90% :: 6.00% //

.99/T+D : 2.33 % :: 1.44% :: 1.71% :: 0.57% // 1.51% :

Ag.99-$: $ 19.02 : $ 18.88 : $ 18.94 : $ 18.83 // $ 19.26 :

AgTD-$: $ 18.59 : $ 18.61 : $ 18.62 : $ 18.72 // $ 18.97 : (/6.15 x35.274 = /216.935)


SLV--- : $ 18.10 : $ 18.06 : $ 18.26 : $ 18.28 // $ 17.89 :

AgTD$/ : r-1.027 : r-1.030 : r-1.020 : r-1.024 // r-1.060 :

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  • 2 weeks later...

Is the SGE (inside China) Silver contract dying?


This was posted on Youtube:

On the Harvey Organ video : https://www.youtube.com/watch?v=aZwSiHBxm0c


Someone posted that Silver in the SGE warehouse was down to only 80 MT. Here's my reaction: "One theory is: The Chinese have bought Silver on Comex, and will bring it to Shanghai, and put it in their new "international" taxfree warehouses there. They will only pay the tax when they are sure they will need to bring the silver into China for manufacturing. Meantime, it will provide a nice Silver price hedge, and an arbitrage-able international price."

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  • 2 weeks later...
China Gold demand picking up?

Demand 39t In Week 36,

Demand 41t in week 37, 1331t YTD (Ave: 36.0 t)

Chinese Gold Demand Explosive

Whilst western media are still under the assumption Chinese gold demand is declining, based on data from the World Gold Council and net gold export from Hong Kong to China mainland, in reality demand is extremely strong. As I’ve previously written, the lower the price of gold will go the more physical gold will be purchased by the Chinese people, and the price of gold has been dropping since mid August...

Chinese Gold Demand 41t in week 37, 1331t YTD

Where to begin. Much has happened this week in the Chinese gold market; on wednesday the Shanghai Gold Exchange (SGE) released multiple rule books written in English describing every detail on the workings of the SGE and its brand new subsidiary the Shanghai International Gold Exchange (SGEI). Finally the world can read everything about the Chinese exchange that is the strongest force in the physical gold market, but was widely misunderstood because of the language barrier. Though having channeled unprecedented amounts of physical gold into China mainland the SGE has been enjoying little coverage in the mainstream media.

Silver Inventory : Just 67 tonnes !

Silver inventory on the SHFE has dropped 9 % w/w, to 81 tonnes, the last data we have from the SGE is they hold 67 tonnes of silver inventory. I would like to stress that most physical silver in Shanghai is not traded over the SHFE or SGE but through the Shanghai White Platinum & Silver Exchange (WPSE). The SHFE and SGE are more for hedging and speculation.


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  • 4 months later...

China plans Yuan-denominated Gold Fix - SCMP, 2/28/15 (pg.B5)


China wants to be price-setter for bullion

+ A yuan-denominated price fix to be launched later in 2015

+ To be derived from a new 1kg contract, on Shanghai Gold exchange (govt run)

+ China is also the top producer of gold

+ New fix could add to pressure on the London fix; China says: will be "complimentary"

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