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LAWRIE WILLIAMS: China’s 2016 Gold Demand Continues Downward Trend

Today we’ve received the latest figures for China’s official gold reserves and also the latest Shanghai Gold Exchange (SGE) gold withdrawal figures for October and both suggest that this year’s decline in overall gold demand, both from official and commercial entities has continued to fall.  First the People’s Bank of China reported that the country’s official gold reserves rose to 59.24 million troy ounces (1,842.6 tonnes) at the end of October, up from 59.11 million troy ounces (1,838.5 tonnes) in September, a rise of a paltry 4 tonnes, well below the 14 tonnes added to reserves in the same month a year ago and follows on from rises of only 5 tonnes in August and September this year.  Year to date China has only reported a total reserve increase of around 76 tonnes compared with the 104 tonnes it reported for the final 6 months of 2015 (it only began reporting monthly reserve increases in July 2015).

While these latest statistics suggest a definitive decline in official purchases, leaving China with an estimated total holding of around  1,847 tonnes – the world’s fifth largest national gold holding – the holding remains tiny in terms of percentage of its total foreign reserves (less than  2..5%) in comparison with the world’s other major gold holders like the USA, Germany, Italy and France, all of which reportedly hold over 60% of their forex reserves in gold. (It is widely believed though that China may hold far more gold than it reports to the IMF as it is known to have heavily under-reported its holdings in the past).

But official holdings are probably only the tip of the iceberg as far as Chinese gold demand is concerned as known gold imports have been running at over 1,000 tonnes a year for some time and it is also the world’s largest gold producer.  One measure of China’s non-official gold demand comes in reported monthly gold withdrawals from the Shanghai Gold Exchange (SGE0 and as can be seen from the table below these are currently running 28% below last year’s record levels, although only 5.7% down on 2014 levels.

Shanghai Gold Exchange Monthly Gold Withdrawals (Tonnes)

Month

2016

2015

2014

% change 2015-2016

% change 2014-2016

January

225.08

255.42

246.00

- 11.8%

February*

107.60

156.36

171.67

- 31.2%

-37.3%

March

183.24

213.35

146.56

-14.1%

+25.0%

April

171.40

195.45

129.59

-12.3%

+32.2%

May

147.28

162.15

129.34

-9.2%

+13.8%

June

138.51

195.67

128.03

- 29.2%

+8.2%

July

117.58

285.50

137.53

- 58.8%

-14.4%

August

144.44

265.27

161.95

- 45.6%

-10.8%

September

170.90

259.98

202.43

 -34.3%

-15.6%

October

 153.25

176.29

201.11

 -13.1%

 -23.8%

November

202.71

212.49

December

228.21

235.66

Year to end October

1,559.28

2165.44

1,654.21

-28.0%

-5.7%

Full Year

2,596.37

2,102.36

Source: Shanghai Gold Exchange, Lawrieongold.com

The latest monthly withdrawal figure was 153.25 tonnes, 17.65 tonnes less than September, but this is probably not significant as October figures included the Golden Week holiday when the Exchange was closed.  We can expect something of a pick-up in November and December as demand increases ahead of the Chinese New Year and there are already anecdotal reports that retail gold demand has been rising in recent weeks.  Overall we’d expect the annual total to eventually come in at around 2014 levels at around 2,100 tonnes, but this would still be a substantial number in terms of a percentage of global demand and represents more than 60% of global new mined output  Chinese demand may be down this year but it still remains hugely significant.

07 Nov 2016 | Categories: Gold, China

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