Who are the largest traders in the Chinese gold market?

Last week we released a report that looked in to the depths of the Shanghai Gold Market. In the report we revealed the volumes that pass through the exchange as well as the huge amounts of delivery taking place.

We concluded that the SGE would not yet be a force for competition when it came to the New York and London Gold powers of price discovery. But it could, however drive that wedge between the paper and physical gold market.

We now ask who it is that is driving this wedge and are they consistently buying up, or selling down, gold. So we turn our attention to those who are participating in this market.

In our previous article we outlined the levels of participation on the Shanghai Gold Exchange. We quoted the Chairman and President of the Exchange who said, ‘though institutional clients are still the most important participants in the market the market share of individual investors has soared in recent years.’ The graph below is not just institutional investors but those who were make up the top ten market participants. However as our research shows, individuals barely touch the trades coming from institutions.

Since 2011, the following names have dominated the top ten total gold trading table on the Shanghai Gold Exchange. We have calculated the data in the following tables and graphs by taking each of the SGE’s top ten tables for total gold trading, buying and selling. We have then taken the amounts (in kg) each member traded across the months and worked out a percentage representation of the total volumes traded in the 30-month period.

The data shows which institutions feature and account for more than 1% of volumes of the ten largest traders, and also what percentage of activity they accounted for withinthe ten largest traders. There were approximately 45 institutions featured.

Total gold trading

It is clear that whilst individual investors may well be taking up more room on the exchange, there are a few major institutions who represent the lion’s share of the volumes, namely Bank of China and ICBC.

In terms of total gold trading, Bank of China accounted for over 21% of the largest ten members’ activity between January 2011 and June 2013. They were swiftly followed by ICBC and ICBC Personal.

NB: Due to putting SGE data through Google Translate there seemed to be a difference between ICBC and ICBC personal. There may also be some misnamed institutions

Individually ICBC and ICBC Personal accounted for 13.2% and 6.3% (respectively) of total gold activity in the period covered. If, as we suspect, they are the same organisation then they still fail to overtake Bank of China.

Note, no foreign banks make it into the top five of those who accounted for the most activity on the exchange. Societe Generale account for less than a fifth of Bank of China’s total activity. ‘Individual’ we take to mean non-institutional and they top the only other foreign institution, ANZ, in terms of activity on the exchange.

Whose buying gold?

When it comes to the ten largest participants in the buy side of the market on the exchange the story hasn’t changed by much. The Bank of China continue to lead the race, accounting for over 17% of the volumes from the ten largest traders going through the exchange in the last 30 months. Once again ICBC and ICBC personal quickly follow up the Bank of China, with 14.7% and 7.12%, should these two be combined then they overtake Bank of China by a significant percentage, over 4%.

However, one thing that is interesting to note is that Societe Generale has a larger presence in the buy side of the market, than it does in overall volumes.

Meanwhile on the sell side of the market Bank of China dominate once again, with 23% with ICBC Personal quickly following them with over 13%.

Just to give you a quick insight into the changes in those participating on the exchange we bring you three snapshots of the top ten largest traders in the buy-side of the gold market over the last 30-months.

Interestingly the Bank of China has fallen a position in each year, accounting for less and less of the total bid each time. Whilst 2013’s data only accounts for 6-months, the difference in total bid participation between now and 2011 has fallen by over 6%. In contrast ICBC has managed to climb positions.

Another interesting point of note is that both Societe Generale and ANZ have fallen out of the top buyers this year. In fact, ANZ does not feature at all in the 2013 data.

Concluding remarks

As we said previously in our opening comments, we do not believe that the Shangai Gold Exchange is in a position to impact the international gold price in a dominant way quite yet.

However, it is interesting to take note of who the main players are in this market. Given the power JP Morgan et al are said to have in the paper gold market and the price of gold, we suspect their Chinese contemporaries are also going to be significant in the future. Particularly as we suspect pushing up the value of the dollar will not be at the top of their remit.

Like our research? Get it delivered to you with our fortnightly newsletter.