Selected Recent Media Coverage - Philip Klapwijk - Precious Metals Insights Limited


2013 - September 17 - Thomson Reuters Global Gold Forum - Interview with Philip Klapwijk - The Chinese gold market

Thomson Reuters Community

Jan Harvey at www.community.thomsonreuters.com

I'm joined in the Forum now by Philip Klapwijk, managing director of Hong Kong-based Precious Metals Insights Ltd, who has kindly agreed to talk us through the trends he's picking up on in the Chinese gold market. Welcome, Philip.
22:36:15
Philip Klapwijk (Precious Metals Insights Ltd) - Thomson Reuters hello
22:36:27
Jan Harvey We’ve heard a lot of speculation this year about China taking over from India as the world’s number one gold consumer. Do you think that’s on the cards? Do you have a forecast for total consumption this year by China?
22:37:05
Philip Klapwijk (Precious Metals Insights Ltd) - Thomson Reuters This has been a long time coming ...and we've had some false alarms in the past..but this year, yes!
22:38:10
China was probably good for 700 tonnes of demand in H1, so the full year should be well ahead of 1200 tonnes...price will be a key factor of course
22:38:53
Q3 has been distinctly weaker than Q2, with August a bit soft (relatively)...but now its the run up to Golden Week
22:41:53
After the early October holidays there will be re-stocking. But there could be a soft patch then before we see the Chinese New Year effect kicking in
22:43:03
Jan Harvey Chinese gold imports from Hong Kong were strong in July. Who’s buying – large investors, small ones, institutions, the official sector...?
22:43:38
Philip Klapwijk (Precious Metals Insights Ltd) - Thomson Reuters I think the private investment demand has come off the boil...still historically strong but well off Q2 levels.
22:44:21
Jewellery has held up better, although also off from its peaks...though just recently picking up again with the Shenzhen jewellery show and demand ahead of the National Holiday Golden Week
22:44:45
the Elephant in the Room, though, in my view is the official sector
22:45:17
Jan Harvey Is it possible for you to draw any conclusions about Chinese central bank purchases from the activity you’ve seen in the market this year?
22:46:13
Philip Klapwijk (Precious Metals Insights Ltd) - Thomson Reuters It is quite probable that the official sector in China was good for all domestic supply in H1 and even if its buying may have come off from peaks on the recent round of higher prices, I'd still expect them to have been in net purchase mode ...and those purchases could pick up if gold dips further
22:47:27
Essentially if you look at the Chinese market in H1 the country probably absorbed on a net basis - discounting re-exports etc - something like 1,000 tonnes...that leaves 300 tonnes or more to be explained
22:47:41
And, I think the explanation is official sector purchases
22:48:38
Obviously there has been no official acknowledgement of this...and there might not be for a long time...but it is hard to see where else the demand came from
22:49:51
Moreover, it makes perfect sense for China to diversify its foreign reserves...quietly and at prices that in the long run may turn out to be rather low
22:53:46
Jan Harvey Very interesting numbers there Philip!
22:54:13
Focusing on the retail side of things once more, what sort of products are proving most popular among smaller gold investors – large bars, small bars, coins, jewellery?
22:54:55
Philip Klapwijk (Precious Metals Insights Ltd) - Thomson Reuters Basic, low markup 24k jewellery is the biggest item sold at retail.
22:55:13
It has a dual function: Adornment and investment.
22:56:12
Coins sales have tended to grow but from a very low base as China traditionally is not a strong coin market even if the Panda coin is quite famous.
22:56:47
Besides high carat jewellery, small investors will buy locally produced metric weight bars.
22:57:24
Larger private investors favour 9999 kilobars but these are well beyond the reach of your ordinary retail investor's budget
22:58:05
Many of the 9999 kilobars that go into China therefore get converted by local bar producers into smaller sizes
22:59:43
Jan Harvey What’s the appetite been like for the new ETFs?
23:00:23
Philip Klapwijk (Precious Metals Insights Ltd) - Thomson Reuters It has been rather disappointing...just a few tonnes.
23:01:09
It seems that the rather negative price trend / level has something to do with this
23:01:25
Also, there is the very strong preference in China for physical metal you can hold
23:02:06
And, in addition, a number of the banks offer quite attractive investment products, many of which can be leveraged
23:02:48
Gold futures are also very attractive to the speculative investor and these are often leveraged
23:03:49
It seems therefore that the ETFs have not managed to appeal to the spec investor nor the more fundamental, conservative one...so far at least
23:05:34
Junlu Liang Hi Philip,  net purchases by central banks outside China seems to have dropped ytd, what is your view for that and also what is your forecast for H2?
23:06:24
Philip Klapwijk (Precious Metals Insights Ltd) - Thomson Reuters I think the net figure for H1 rather depends on your view for China.
23:07:23
But, yes, China apart there seems to be a bit less appetite. It may be related to the drop in price, with portfolio managers concerned at buying gold in a falling market.
23:08:02
Maybe besides the risk of getting "egg on your face" there is a genuine concern that we have entered a multi year bear amrket for gold.
23:08:05
market
23:08:44
I would think that the rise in interest rates - at least in some bond yields - may have also been a factor.
23:09:19
Specifically it could be too that some countries that have been purchasing gold for some time, like Russia, are getting close to a comfortable share of gold in their overall reserves
23:11:57
There does seem to be a historical pattern for central banks to 'buy high' and 'sell low'...not that i'd expect any net selling for a while yet, even from within Europe
23:12:42
Jan Harvey Most interesting, Philip. Many thanks for joining us this afternoon!
23:12:54
Junlu Liang thanks philip
23:13:08
Philip Klapwijk (Precious Metals Insights Ltd) - Thomson Reuters Pleasure...

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Jan Harvey at www.community.thomsonreuters.com

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Precious Metals Insights Limited - Gold, silver, platinum & palladium markets consultants, advisers and analysts. Chinese, Indian, USA & world markets analysis and consultancy. Hong Kong & China based worldwide sonsultants service. Global gold, silver, platinum & palladium advisory services. Conference & summit speaking, presentations, panel members, seminars, bespoke advice, reports, analysis, mining ouput, production, consumption, jewellery, industrial and markets analysis, forecasts and other precious metals services provided by Philip Klapwijk managing director and Precious Metals Insights Ltd. Specialist focus area of Chinese and Asian market analysis.
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