Platinum Sales at Shanghai's Gold Exchange Surge 703% From Wednesday to Friday, As Prices Dip

by: Avery Goodman

As western speculators, in London and New York, had "stop loss" orders triggered with forced margin call selling from deep losses in equity markets -- causing a selloff that tanked platinum prices in western markets -- something very different was happening in China. On Thursday, August 4, 2011, sales surged by 346% from the day before. Shanghai Gold Exchange sales of platinum rose from a mere 118 kg to 408 kg on Thursday. By Friday, with platinum prices still deeply depressed, sales increased, again, this time by 203% more, or 830 kilograms. In terms of "cold kilograms", Shanghai Exchange demand increased by 703% from Wednesday to Friday.

Chinese exchange activity must be considered against the fact that the entire world's platinum mining supply is less than 190,000 kilograms and Shanghai Exchange is a very small part of total Chinese platinum market demand. The Chinese market, unlike the west, emphasize physical metal over traded paper. The Shanghai Gold Exchange numbers are interesting, however, because they illustrate an insatiable demand for platinum in China, whenever the price drops a little.

Unlike western speculators, who largely ignore the fundamentals of supply and demand, choosing to rely instead of "stop loss" orders, margin calls, rumor and fear to guide their trading, in Shanghai the market participants are cued into physical demand, not chasing momentum. The contrast between Chinese traders and the speculators who ply COMEX, NYMEX and the OTC derivatives markets in London could not have been more marked than it was this week. Chinese precious metals buyers are thinking long term, buying platinum, and refusing to be taken in by the type of "pie-in-the-sky" thinking that western casino banks encourage.

This intense platinum buying in China comes against a backdrop of what is supposed to be a significant slowdown in the Chinese economy, coupled with deep losses in the Asian stock markets. That says a great deal. Just as wise gold market watchers carefully monitor buying habits and trends in India and, by doing so, are able to determine probable gold price movements over coming months, platinum market watchers can monitoring China, which is the largest platinum market in the world by far. If recent activity is any indication, platinum is due to rise substantially as the next few months unfold.

For more information on platinum, including a description of various investment vehicles, see my previous articles here, here, here and here.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.