LAWRIE WILLIAMS: China SGE gold withdrawals sharply down in April

The April figures for Shanghai Gold Exchange (SGE) gold withdrawals show a sharp fall year on year which could indicate a significant downturn in the Chinese economy, although it is probably still too early to confirm this given withdrawals last year fell sharply from May onwards.  However the cumulative totral to date is very close to that of 2017. 

The latest total gives withdrawal figures ample time to recover through the remainder of the year.  But even so the figures may show that the Trump imposed tariffs are beginning to bite as far as gold imports and consumption are concerned.  The latest month-by-month withdrawal figures, and comparative ones for 2018 and 2017, are shown in the table below:

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

 151.89

212.64

165.78

 -28.57%

 -8.38%

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

688.23

747.25

690.68

-7.89%

 -0.35%

Full Year

 

2,054.54

2,030.48

 

 

Source:  Shanghai Gold Exchange.  Lawrieongold.com

* Months which include week long New Year and Golden Week holiday periods when the SGE remains closed

We have always looked upon the SGE withdrawal figures as being a strong indicator of Chinese gold consumption and imports and to an extent the latest figure confirms the slowdown in gold imports we have seen from key gold exporters like Switzerland so far this year.  But as far as global gold demand is concerned it appears that demand is picking up nicely in India and is strong in Europe (particularly in Germany and Austria) and this should counterbalance any Chinese shortfall this year, 

But – and it is a big but – the world could be heading for a trade war-stimulated recession which could have a somewhat mixed impact on global gold demand.  On the one hand it could stimulate safe haven buying from those with deep pockets, but also adversely affect purchases from the huge numbers of small gold accumulators, particularly in countries like China, which tend to have a significant impact on global gold demand.  It could also stimulate sales of gold related investment holdings as people use their built-up gold accumulations to alleviate any recession-related income downturns and also revive what has been a flat to falling gold scrap supply sector.

One should also take into account what appear to be increasing central bank gold purchases as a further boost to demand.  At the moment the number of countries openly adding to their gold reserves appears to be limited but it does appear that some countries which had held their gold reserves steady for a number of years may now be adding to them on a regular basis.

It is yet too early to confirm whether we are heading for a global recession or not – the likelihood is that there could well be a recession ahead, but how deep this may be and when it will occur probably still remains in the future.  However equities markets are definitely nervous and while we may well see something of a recovery in U.S. equities today after yesterday’s very sharp falls, this may not be prolonged.  The U.S. Fed and Administration will be keen to see, and may help stimulate, a market recovery, but ultimately the market itself will probably win out which could be bad for equities, but positive for gold and silver.

14 May 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