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LAWRIE WILLIAMS: China gold demand still picking up in June – but slowly

08 Jul 2022

Despite recent disappointing gold import figures from Switzerland, latest gold withdrawal data from China's Shanghai Gold Exchange (SGE) for the month of June do at least point to a tentative demand pick up in the world’s leading gold consuming nation.  Of course, with Russia perhaps needing to find a new export outlet for its gold production, its neighbour, which is not party to the U.S.-imposed sanctions programme may be providing a convenient outlet.  Neither country is necessarily particularly forthcoming about its gold import and export statistics at present, so any such supposition will have to remain speculative.  However, as probably the world’s two leading gold producers there is endless opportunity available for disguising any gold trade between them.

A table showing the monthly gold withdrawal figures from the SGE is set out below.  SGE withdrawals are widely believed to be a strong indicator of Chinese domestic commercial gold demand, but probably excludes gold which may be being added into the nation’s gold reserves which many analysts believe may be a substantial amount held in accounts which the Chinese government claims do not need to be reported to the International Monetary Fund (IMF).  If they do exist, these additional reserves may be mobilized should the rumoured alternative reserve currency being set up by Russia, China and the other BRIC nations see the light of day.

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

 

 110.61

 82.94

   

August

 

 149.95

 111.37

   

September

 

 190.87

 153.98

   

October*

 

 136.62

 94.28

   

November

 

 158.31

 127.65

   

December

 

 193.44

 162.30

   

Cumulative

708.72

805.52

472.82

-12.02%

+49.89%

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

As can be seen from the above table, there were a few weak withdrawal months earlier in the year when figures slipped below those of a year ago, although they remained mostly well above those of COVID-hit 2020, and Chinese demand has looked to have been climbing back again at the mid year and it will be interesting to see if this trend continues. 

China has more recently been hit by something of a resurgence of the COVID pandemic, which has led to lockdowns in some major cities, including Shanghai, which will have dented gold demand somewhat.  It does seem to be pulling out of this problem, and if its rather draconian spread prevention solution has proved to be successful, as opposed to that of many other countries which are instead choosing to live with the pandemic amidst better medical controls, we might well expect further Chinese gold demand growth in the second half of the year.

Even so, it will be touch and go whether the annual total will even match that of 2021 when Chinese gold consumption was around 1,745 tonnes.  Although this was well above the previous pandemic-affected year’s 1,200 tonnes, it was still hugely below the 2,000 tonne plus figures recorded in the three years before that.  One suspects that 2,000 tonne plus annual gold consumption levels may still be forthcoming in the years ahead unless the global recession, which looks as if it is about to impact much of the developed world, also has a strong effect on the Chinese domestic economy which should probably be resilient enough to withstand it due to the country’s massive population and continuing domestic demand growth.

08 Jul 2022 | Categories: Gold, China, Russia, Switzerland