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LAWRIE WILLIAMS: China gold demand just beginning to pick up?

April gold withdrawal figures announced by the Shanghai Gold Exchange (SGE) suggest that gold demand in China may be beginning to pick up as the country exits from the coronavirus-imposed lockdowns.  However the figures for April, just a little over 13.5 tonnes more than in March, continue to suggest that total Chinese annual gold demand will be considerably lower than it has been for the past several years.  Year-to-date gold withdrawals from the SGE are down by over 50% from those for each of the previous six years and while we could see something of a pick-up as the current year continues, we should anticipate total annual gold demand from China coming in at perhaps as low as around only 50-65% of the levels seen only a year ago – which itself was a weak year for Chinese gold demand.  But it is also worth noting that, last year, demand levels did begin to tail off a little in the last eight months of the year, so perhaps the overall fall in Chinese gold demand this year compared with 2019 may not be quite as great as the figures to date suggest.

We have always equated SGE gold withdrawal totals as being a measure of the sum total of Chinese gold consumption, despite this parallel being largely dismissed by the principal global gold analysing consultancies.  In our support we have always been able to point out that SGE gold withdrawal totals come far closer to known gold imports into mainland China plus China’s own gold output, plus an allowance for scrap conversion and some other unknown imports, while the major gold consultancies’ figures come in at a considerably lower level.  In our view the consultancies are probably not taking into account some sectors of the Chinese gold demand pattern.  Notably, they may not cover gold imported by the Chinese banking sector – or perhaps even by government agencies, but classified as ‘non-reportable’.  The known totals suggest that our analysis is far closer to the true figures than the consultancies’ calculations.  Incidentally our viewpoint is independently also put forward by China-follower Koos Jansen who probably delves into Chinese gold flow figures in more detail than anyone else around the world.

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





% change 2019-2020

% change 2018-2020

















































Year to date**






Full Year






 Source:  Shanghai Gold Exchange.

** Cumulative figure as reported by SGE

Assuming we are correct in our forecasting and assume that total Chinese gold demand this year comes in at say 60% of last year’s level of 1,642 tonnes it would put China’s gold demand total this year at just under 1,000 tonnes – still making the nation the world’s largest gold consumer.  This would mean a demand shortfall of around 650 tonnes compared with 2019.  Can this shortfall be made up in other aspects of global gold demand – particularly given Russia is at least temporarily halting gold accumulations by its central bank?

Latest figures from the World Gold Council on gold ETF demand show that global gold-backed ETF inflows so far this year have totalled 468.4 tonnes  (2019 figure was around 60 tonnes for the same period), which compares with a shortfall of some 370 tonnes year to date from China.  The big Chinese fall in demand so far, however, has mainly occurred in the months that the nation was at a virtual standstill because of the COVID-19 virus spread.  Measures taken to bring the virus under control, should mean that the demand shortfall vis-a-vis 2019 should not be as great for the remainder of the year.  Thus, should gold ETF inflows continue at anywhere near the current levels they could well more than compensate in gold demand terms for any further drop in Chinese gold consumption.

08 May 2020 | Categories: Gold, China

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