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LAWRIE WILLIAMS: Blip in China September gold demand y-o-y?

16 Oct 2022

Anecdotal accounts have Chinese gold demand riding high already this year with talk of price premiums and bullion shortages developing, but this does not seem to be being confirmed by the latest data from the Shanghai Gold Exchange (SGE).  This suggests that gold demand actually slipped a little in the September month and that the cumulative total for the first nine months of the current year may be slightly below that of the corresponding nine month period of 2021.  Not by enough perhaps to worry about yet, but sufficient to generate further close attention to figures that may arise month by month for the remainder of the year.  That would be sufficient to make our earlier prediction of an overall Chinese annual gold consumption figure for the current year of around 1,800 tonnes perhaps a little on the optimistic side.  The occasional draconian lockdowns in key cities to prevent any spread of the Covid virus may be having and undue effect on overall earnings and gold demand.

The SGE withdrawal figures on a month by month basis year to date are set out in the table below.  Assuming similar withdrawal levels to last year for the final quarter of the year, Chinese gold consumption for 2022 looks perhaps more likely to end up around 1,700 tonnes, which would still make the nation comfortably the world’s largest gold consumer.

Table: China SGE Monthly Gold Withdrawals 2020-2022 (Tonnes)

 Month

2022

2021

2020

% change 2021-2022

% change

2020-2022

 

January

185.51

159.49

110.87

+16.3%

+67.3%

 

February*

  92.43

 92.39

 28.99

   0%

 +218.8%

 

March

 103.79

 167.74

 82.27

-38.1%

+26.15%

 

April

   83.74

 148.04

 95.80

-43.4%

 -12.59%

 

May

103.12

 105.06

 69.18

-1.9%

+32.9%

 

June

140.13

 132.80

 85.71

+5.5%

+63.5%

 

July

160.77

 110.61

 82.94

+45.3%

+93.8%

 

August

 166.12

 149.95

 111.37

 +9.7%

 +32.96%

 

September

179.84

 190.87

 153.98

-6.13%

+14.3%

 

October*

 

 136.62

 94.28

     

November

 

 158.31

 127.65

     

December

 

 193.44

 162.30

     

Cumulative

1,215.45

1,256.95

821.11

- 3.41%

+32.44%

 

Full year

 

1,745.70

1,205.33

     

 Source:  Shanghai Gold Exchange, Sharps Pixley.

*Months incorporating Golden Week holidays when SGE closed for a wek

Of course the big unknown here remains Russia – the world’s second or third largest gold producer depending on whose figures one takes.  U.S. and European imposed economic sanctions have cut off the Russian-produced gold from its normal markets and it will have been searching for ‘friendly’ outlets for its gold production, in part at least to help it finance its ongoing military incursions into Ukraine.  China is an obvious outlet for this Russian gold and is certainly receiving some of it, although the figures that have been forthcoming in official announcements so far do not account for very much of it. 

Both nations have histories of being extremely secretive about what they may consider to be strategic matters and this could well cover gold flows between these two neighbouring countries which are supposedly allies.  Russia mines over 300 tonnes of gold annually and China is believed by many to be surreptitiously building up its gold reserves to match, or exceed those of the U.S., and secret Russian gold imports could well be a means to this end.  This is all speculation of course, but could provide an answer that would seem to meet both nations’ assumed needs.

16 Oct 2022 | Categories: Gold, China, Russia