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LAWRIE WILLIAMS: China gold demand down sharply due to Ncov-19

With the Chinese New Year falling right at the end of January, in a normal year we could expect to see strong Chinese gold demand, as expressed by gold withdrawals from the Shanghai Gold Exchange (SGE) in January.  But 2020 is no normal year in China with the NCOV-19 virus spreading across the nation, decimating gold demand as it impacts the major population centres, coupled with the Chinese Government‘s draconian measures to try and counter the virus’ spread.  Major cities, not least Wuhan with a population of 11 million people, have been put into lockdown, factories have been shut down and people confined to their apartments.  This has been replicated in several other major cities and even where not, fear stalks the streets and manufacturing outlets have been closed down and commerce in many places throughout China has ground to a halt.

Table: SGE Monthly Gold Withdrawals 2018-2020 (Tonnes)





% change 2019-2020

% change 2018-2019



















































Full Year






 Source:  Shanghai Gold Exchange.

Indeed the Chinese Government has been accused of hugely under reporting the true number of virus cases and deaths.  If one looks at a map of the geography of the virus incidence – there is an excellent one put out by Johns Hopkins University in the U.S. (see virus map) updated daily with the officially announced figures – it is significant that a number of major Chinese cities are showing zero cases.  Given the apparent ease of spread of the virus and the incidence of internal travel over the New Year holiday (it has been estimated that as many as 5 million inhabitants of the epicentre city of Wuhan had set off on their New Year travels before the lockdown was imposed) one would expect at least some virus infection incidence in many, if not most, of these.

Outside China we may also be experiencing the tip of an iceberg,  The biggest incidence is aboard the cruise ship Diamond Princess, quarantined in Yokohama, Japan with over 450 confirmed cases to date and, apparently, not everyone on board has yet been tested.  However countries like North Korea and Indonesia, both of which would be expected to have at least some cases, have not reported any as yet!  The potential for a global pandemic remains.

In China we have to expect February SGE gold withdrawal figures will be at least equally badly affected – indeed probably even more so given an extended New Year holiday period and more fear keeping people from interacting with others.  There is the likelihood that increased safe haven gold demand outside China may in part balance the falls within that country, as it has been suggested that even a major Chinese GDP growth downturn, which is inevitable, will adversely impact equities markets worldwide.  However, any apparent slowing of the virus spread inside China (which we feel is based on hugely massaged statistics put out by the Chinese authorities) seems to bring Western investors back into the markets.  We reiterate that we feel any such optimism is misplaced!

Chinese gold demand was already turning down in 2019 and we should now anticipate sharply lower figures throughout the current year.  Indeed, if the virus incidence continues for much of the year we could well see China’s annual gold demand in 2020 drop below 1,000 tonnes for the first time in 10 years.  This is a massive fall even on last year’s hugely reduced figures when we put demand at over 1,600 tonnes after six years of close to, or exceeding, 2,000 tonnes annually.  As can be seen from these figures this will put a huge dent in global gold demand.  Gold investors will be hoping that central bank gold demand and gold ETF inflows remain strong to compensate.

17 Feb 2020 | Categories: Gold, China

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