How Significant Was The 32% Fall In HK Gold Exports To China

At 750 tonnes, HK gold exports to China were down 32% year on year, but how important in reality are these HK figures nowadays in terms of total Chinese demand?

“There are three kinds of lies: lies, damned lies, and statistics.” – a phrase purportedly used by UK Prime Minister Benjamin Disraeli in the 19^th century, and the world is ever more beset with this truism.  Statistics are interpreted or manipulated to make points by politicians, journalists, investment advisers, mining and oil companies and their NGO opponents – indeed by almost anyone who can produce some kind of figure to supposedly support their argument, even if taken out of context, or where the figures may be negated by other related changes.  In these days of global dissemination over the internet, with statements remaining there for people to pick up, even if subsequently disproved, such statistical irregularities become ever more important, and ever more dangerous for people who believe them in their entirety.

The point with statistics is that depending on timing and a variety of other related matters they can be presented to make a case which further analysis shows can be very misleading.  But the general public which reads them may well be convinced of their veracity due to supposed source or personal reputation and has neither the time, nor will, to check them out more thoroughly.

Here is a case in point:  A Bloomberg headline yesterday screamed “China’s Gold Imports From Hong Kong Tumble 32% From Record”. As a statistic taken at face value it is of course absolutely true.  Hong Kong net gold imports into China did indeed fall by this amount during the year, but the article could be also taken to imply that Chinese gold demand overall fell by a similar amount, whereas the probability is that it did fall, but by nowhere near as much as that particular bald statistic would suggest.  It only presented a part of the overall picture.

This is because the goalposts were moved in 2014, with the Chinese making it easier to import gold via other ports of entry.  Thus net imports from Hong Kong in previous years provided a great proxy for overall Chinese demand (just add Chinese production, scrap recycling and gold refined from imported precious and base metals concentrates to get a near- full figure).  But in 2014 we are given to understand that imports through other points of entry, such as Shanghai and Beijing now play an increasingly important role in Chinese gold supply and thus Hong Kong figures, though they remain significant in the overall picture, are not nearly so relevant in assessing the country’s total gold demand as they used to be.

In our view, figures such as withdrawals from the Shanghai Gold Exchange (SGE) give a far better picture of overall Chinese demand than do statistics for a single port of entry.  So while Hong Kong net gold exports to mainland China were indeed down 32% at 750 tonnes in 2014 as opposed to 1109 tonnes in the record 2013 year, SGE withdrawal figures at a shade over 2,100 tonnes were only 3% down on those for the record 2013 year – a far more accurate statistic as to true Chinese demand for gold followers to rely on than just the Hong Kong exports.  So while the Bloomberg story was technically correct, it perhaps didn’t necessarily present the full story.  One should perhaps take all such published statistical data – even that appearing sometimes on Mineweb itself – with a degree of scepticism.  Such is life nowadays.

******** 

Courtesy of http://lawrieongold.com/