LAWRIE WILLIAMS: China gold demand marginally up so far this year

China’s gold demand as represented by Shanghai Gold Exchange (SGE) monthly gold withdrawals had seemed to be slipping back this year. But this now looks to have been the timing of the Chinese New Year holiday when the SGE was closed for a week.  A boost in withdrawals in March has seen the Q1 figures this year climb above those for the same quarter for the past two years (see table below), albeit only marginally so.  Although it is early days yet, on current figures China could well be heading for another year of +2,000 tonne gold demand.

Table: SGE Monthly Gold Withdrawals 2017-2019 (Tonnes)

Month

2019

2018

2017

% change 2018-2019

% change 2017-2019

January

218.54

223.58

184.41

-2.30%

18.51%

February*

  99.77

118.42

148.24

-15.75%

-32.70%

March

 218.03

192.61

192.25

 +13.19%

+13.41% 

April

 

212.64

165.78

 

 

May

 

150.58

138.08

 

 

June

 

140.59

155.51

 

 

July

 

137.41

144.71

 

 

August

 

190.59

161.41

 

 

September

 

188.12

214.24

 

 

October*

 

142.94

151.54

 

 

November

 

179.08

189.1

 

 

December

 

178.04

185.21

 

 

Year to date

536.34

534.61

524.90

+0.32%

+2.18%

Full Year

 

2,054.54

2,030.48

 

 

Source:  Shanghai Gold Exchange.  Lawrieongold.com

* Months include week long New Year and Golden Week holiday periods

 

The Chinese demand news will come as some relief to gold investors.  The February figure had been low compared with the two years previous, but with central bank demand seemingly holding up well so far and some other demand figures looking a little stronger according to Metals Focus’ Gold Focus report, this may be enough to counteract a continuing series of withdrawals from the big GLD gold ETF.  It seems that no sooner does the World Gold Council publish a statement that global ETFs are increasing their gold hogold Trustldings that GLD appears to start moving in the other direction.

To this observer the withdrawals from GLD, in the face of what appears to be a strengthening gold price, is illogical given that the withdrawal figures are not being matched in the other big U.S. gold ETF, the iShares Gold Trust (IAU).  It is possible that closer scrutiny of the COMEX gold futures machinations by the U.S. Justice Department is leading those who would seek to control the gold price to utilise other high profile gold investment channels to perpetrate their agenda, and GLD holdings would fit this purpose well!

We reiterate here our belief that SGE gold withdrawals are an excellent indicator of China’s ongoing gold demand despite arguments against this from some of the premier precious metals consultancies which tend to estimate Chinese demand at a level well below China’s known gold imports plus its own domestic gold production, let alone scrap supplies and gold imports from countries which do not detail their country-by-country gold export breakdowns.  SGE withdrawal totals on an annual basis are far closer to these annual figures than those from other sources – and in the past the official China Gold Yearbook itself has equated SGE gold withdrawal figures to total Chinese demand.  Whatever the truth of this may be, the SGE figures do give a monthly year on year comparison which has to be a great indicator of the overall demand flows for Chinese gold.

11 Apr 2019

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