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LAWRIE WILLIAMS: China Q1 gold demand 7.7% Up On 2016

While the detailed Shanghai Gold Exchange (SGE) Monthly Report figures on its website still seem stuck on the February figures (released on March 7th), trawling elsewhere through the site suggests that the March withdrawals figure actually came through at 192.25 tonnes and totalling up the reported year to date figures show that Q1 withdrawals totalled 555.9 tonnes – some 7.7% up on the 2016 Q1 figure, although still 11% behind that for the record 2015 calendar year. 

(There does appear to be an anomaly of around 30 tonnes on the cumulative year to date figure as reported in the March SGE Delivery volume table, but these may be accounting anomalies from the preparations of the figures under different systems so we’ll let our assessment shown below ride until we may have a more accurate cumulative figure assuming the SGE reports the March figures separately in the same format as January and February.)

 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

 

171.40

195.45

 

 

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

555.90

515.92

625.13

+7.7%

- 11.1%

Full Year

 

 1,970.37

2,596.37

 

 

Source: Shanghai Gold ExchangeLawrieongold.com

*February figures always distorted by Chinese New Year holiday

While China’s gold demand as expressed by SGE withdrawals may be up on that of a year ago, it is early days yet for 2017 and it should be recalled that Chinese gold demand was probably at its lowest for four years in 2016, and way below that of the record 2015 year.  There are, however,  also a number of other factors out there – not least a potential for economic conflict – or even, but probably unlikely,  military conflict – between China and the USA over a number of flashpoints such as trade equality, North Korea and the South China Sea any of which could affect gold demand positively.

Whether SGE gold withdrawals should be equated to the real gold flows into China remains a contentious point.  As we have pointed out here beforehand the withdrawals data as reported appears to offer a far closer correlation to the sum of Chinese gold imports plus domestic gold production and an estimate of scrap recycling than some of the estimates of demand produced by independent specialist consultancies.  In part this divergence of estimates tends to relate to how Chinese demand is calculated, with the consultancies tending to dismiss gold going into the financial and banking sectors.  None of the figures take into account anything that may, or may not, be being absorbed by the government for the nation’s gold reserves.  Officially these have not increased for the past five months – See: Chinese CB reports zero addition to gold reserves in March – back to its bad old days but doubts are being raised again as to whether China is again hiding gold reserve additions in separate accounts now that the nation has achieved its aim of having the Yuan (Renminbi) incorporated as an integral part of the IMF’s Special Drawing Rights.

 

17 Apr 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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