LAWRIE WILLIAMS: China October gold demand marginally up yoy
There does seem to be some evidence that Chinese gold demand is beginning to pick up. Data from the World Gold Council’s Gold Demand trends report for Q3 2020 noted that Chinese demand for gold coins and bars increased 35.4% year-on-year to 57.8 tonnes. And the country’s holdings in gold-backed ETFs also increased by 13.1 tonnes to 70 tonnes in the quarter. We had noted a pick-up in demand in August and September in our analysis of the Shanghai Gold Exchange’s gold withdrawal figures – which we assume relate closely to China’s real gold demand - and now the latest SGE withdrawal figures confirm the upwards trend – but only just.
However the SGE’s October figures should be viewed with some caution as that month covers the week-long autumn Golden Week holiday over which the Exchange is closed for transactions and thus the October figures are always something of an anomaly when compared with those for most other months of the year. This year the SGE reported gold withdrawals of 94.28 tonnes compared with October 2019’s 91.15 tonnes – probably too close to discern any significant trend. In comparison with 2018, though, the figure for October withdrawals is still substantially down.
Overall, the latest figure suggests total SGE gold withdrawal volume for the full year will be in the order of 1,100, or perhaps 1.200 tonnes - less than half the volume achieved in the peak year of 2015. But this will still make China the world’s largest gold consumer despite this year’s gold demand being hugely affected by the COVID-19 virus pandemic which hit the country particularly hard in the first two quarters of the year.
Table: SGE Monthly Gold Withdrawals 2018-2020 (Tonnes)
|
Month |
2020 |
2019 |
2018 |
% change 2019-2020 |
% change 2018-2020 |
|
|
January |
110.87 |
218.54 |
223.58 |
-49.31% |
-50.64% |
|
|
February* |
28.99 |
99.77 |
118.42 |
-71.14% |
-75.52% |
|
|
March |
82.27 |
218.03 |
192.61 |
-62.27% |
-57.29% |
|
|
April |
95.80 |
151.89 |
212.64 |
-36.93% |
-54.95% |
|
|
May |
69.18 |
123.11 |
150.58 |
-43.81% |
-54.06% |
|
|
June |
85.71 |
107.45 |
140.59 |
-20.23% |
-39.04% |
|
|
July |
82.94 |
129.33 |
137.41 |
-35.87% |
-39.64% |
|
|
August |
111.37 |
107.73 |
190.59 |
+3.38% |
-41.57% |
|
|
September |
153.98 |
117.08 |
188.12 |
+31.52% |
-18.15% |
|
|
October* |
94.28 |
91.15 |
142.94 |
+3.43% |
-34.04% |
|
|
November |
119.43 |
179.08 |
||||
|
December |
158.50 |
178.04 |
||||
|
Year to date** |
915.36 |
1,371.08 |
1,697.48 |
-35.23% |
-46.08% |
|
|
Full Year |
1,642.01 |
2,054.54 |
||||
Source: Shanghai Gold Exchange.
*Months incorporating Golden Week holidays when SGE closed
** Cumulative total as reported month by month by the SGE. The SGE’s official reported cumulative total is some 10 tonnes higher.
While we would anticipate there will be a pick-up in overall Chinese gold demand in the final two months of the year to perhaps match last year’s figures – or even exceed them, the nation’s gold demand seems unlikely to return to the 2015 level of around 2,500 tonnes. The country’s annual GDP growth appears to have fallen back year on year and while so much virus-induced economic uncertainty continues to affect global trade – which is key to China’s ongoing growth – we suspect ongoing economic growth will continue to be adversely affected, and with that the nation’s gold demand. Although China still remains the world’s leading gold producer its annual output has been decreasing year on year and both Russia and Australia are seeing output growing and either, or both, could possibly overtake China as the world’s No.1 within the next few years.
