LAWRIE WILLIAMS: China gold consumption still climbing y-o-y
Despite some of the problems China appears to have been having with local resurgences of Covid infections, and the somewhat draconian measures it has been taking to prevent its spread, the effects on the nation’s gold consumption this year appear to have been somewhat limited. Indeed, according to the latest gold withdrawal figures from the Shanghai Gold Exchange (SGE) which we consider to be equivalent to actual Chinese gold consumption, the August figure for 2022 has come in almost 10% higher than that for the same month in 2021and substantially ahead of the strongly Covid hit 2020 figure. (see table below).
This is still well below the peak gold demand years so there is still quite a way to go if China is to regain its true demand potential of consuming well over 2,000 tonnes of gold a year. If demand holds up for the remainder of the current year then one could perhaps expect full year total Chinese gold consumption this year, based on SGE gold withdrawals, of close to 1,800 tonnes – still a substantial volume.
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 |
190.87 |
153.98 |
||||
|
October* |
136.62 |
94.28 |
||||
|
November |
158.31 |
127.65 |
||||
|
December |
193.44 |
162.30 |
||||
|
Cumulative |
1035.61 |
955.47 |
584.19 |
+7.74% |
+43.59% |
|
|
Full year |
|
1,745.70 |
1,205.33 |
|||
Source: Shanghai Gold Exchange, Sharps Pixley.
*Months incorporating Golden Week holidays when SGE closed for a week
China remains the world’s largest gold producer – just. Last year its total gold output was, according to specialist consultancy, Metals Focus in its Gold Focus Annual survey, 332 tonnes – only marginally above that of Russia. Its production has been slipping and this year it could well be overtaken as top producer by Russia, Australia, or even both. However China may well now also be providing a major market for Russian gold with the latter having been cut off by sanctions from selling its gold to some of its traditional markets, but needing its gold revenues to help finance its Ukraine conflict.
As we have pointed out beforehand, China has always been less than transparent about the size of its gold holdings which are widely believed to be far in excess of the volume it regularly reports to the IMF. Now it has been joined in this secrecy regarding national gold holdings and movements by Russia which considers this strategic information while its Ukrainian invasion remains in progress. Russia had supposedly been freezing central bank gold purchases for two years after a period where it had been adding around 200 tonnes a year to its holdings, but had announced it was going to resume purchases in April this year. If it has been doing so, though, it has not been releasing any information on this.
In addition to China there are a number of other countries which are thought to be in the market for Russian gold – particularly if Russia is prepared to sell this at a discount to the world price as has been rumoured. Naturally any such sales would be secretive and unlikely to appear in official holdings, at least for now, but may do so if there is a global currency reset which some analysts feel could be forthcoming within the next decade or so.
