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LAWRIE WILLIAMS: China Gold Demand Holding Up Well. May even be better still

The latest published figures for Shanghai Gold Exchange (SGE) gold withdrawals for this year show that gold demand, as represented by the gold withdrawal figures, is holding up well, but the official cumulative figure for year to date withdrawals suggests that this demand could be even stronger! There is something of an anomaly in the officially reported cumulative figure which is somewhat in advance of the calculated figure from the month by month figures as shown in our table.  There appear to have been no adjustments made to prior months’ figures, so it will be extremely interesting to see how these cumulative figures progress in future months.

Either way, 2017 figures remain higher than at the same time last year, but lower than the record gold withdrawal figures of 2015.  We hope to get an answer on the anomalous cumulative figures in the SGE’s latest Data Highlights table, from which the withdrawal figures are taken, but we’re not holding our breath!  However given anecdotal comment coming in there has to be a good chance that the cumulative figure, as quoted in the SGE’s own table is correct (See footnote to our table).

There is some dissension among analysts as to whether or not SGE gold witdrawal figures are a true representation of Chinese gold absorbtion or not, but we have shown in the past that the cumulative total of known Chinese gold imports, plus China's own gold production, plus an estimate for scrap supply come out much closer to SGE withdrawal figures than other estimates of Chinese gold consumption.

Table: SGE Monthly Gold Withdrawals (Tonnes)

Month

2017

2016

2015

% change 2016-2017

% change 2015-2017

January

184.41

225.08

255.42

- 18.1%

 -27.8%

February*

179.24

107.60

156.36

+66.6%

+14.6%

March

 192.25

183.24

213.35

 +4.9%

 -9.9%

April

 171.17

171.40

195.45

 -0.13%

 -12.4%

May

 

147.28

162.15

 

 

June

 

138.51

195.67

 

 

July

 

117.58

285.50

 

 

August

 

144.44

265.27

 

 

September

 

170.90

259.98

 

 

October

 

 153.25

176.29

 

  

November

 

 214.72

202.71

 

  

December

 

 196.37

228.21

 

    

Year to date

727.07**

687.02

820.58

+5.8%

- 11.4%

Full Year

 

 1,970.37

2,596.37

 

 

Source: Shanghai Gold ExchangeLawrieongold.com

*February figures always distorted by Chinese New Year holiday

** Cumulative figure from month-by-month reports.  The cumulative year-to-date figure as reported by the SGE is a rather higher 771.93 tonnes which is 12.4% up on the same time last year and only 5.9% below the record 2015 figure.

Re the SGE’s impact on global markets we should draw attention to some analysis by Ronan Manly as reported on www.bullionstar.com . Manly notes that The growing influence of the Shanghai Gold Exchange (SGE), the world’s largest physical gold exchange, is a topic familiar to many. So it is not surprising that trading volumes at the SGE continued their dramatic rise in 2016, with a record 24,338 tonnes of gold traded across physical delivery and deferred settlement contracts.  Volumes in 2016 were a staggering 43% higher vis-a-vis the 17,033 tonnes traded on the SGE during 2015, which itself was a strong year, since 2015 volumes were 84% higher than the 9,243 tonnes of gold traded at the Exchange in 2014. See “SGE Gold Trading Volume 2015 Up 84 % Y/Y Due To International Board” for more information about the 2015 volumes.  Therefore, in the space of three calendar years, the SGE has seen total trading volumes nearly triple, which is quite an achievement by any standard.”

My colleague, Julian Phillips, writing on www.lawrieongold.com noted that the Shanghai Exchange may well now be leading the way in terms of gold price setting. It comes in between New York’s close and London’s opening and has the potential given the volumes of gold traded, as noted by Ronan Manly above, to guide the price direction of the other major price-setting markets.  Certainly today, with Shanghai trading at Yuan 275.60 (equivalent to around $1,236.50) it certainly seems to have set the stage for the rise in the gold price in Europe this morning (At the time of writing gold was trading at around $1,230 compared with yesterday’s New York close at $1,224).  Where New York will take the price today remains to be seen, but it has opened in line with the London price.

 

12 May 2017

About the author

Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London – recently described as the World’s No. 2 University (after MIT).

e: lawrie.williams@sharpspixley.com

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