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LAWRIE WILLIAMS: China’s 2017 Gold Demand back over 2,000 tonnes

Writing here a month ago we speculated that China’s gold demand for the whole of 2017 as measured by Shanghai Gold Exchange (SGE) gold withdrawals would exceed 2,000 tonnes again. In the event we have been proved correct with SGE full year gold withdrawals totalling a little over 2,030 tonnes thus demonstrating that any talk of falling gold demand in Asia’s economic giant was premature at the least.  True it did not equal that of the record 2015 year, but exceeded that of 2016 by around 3%, despite the Chinese New Year falling later this year which would tend to slightly depress the December demand figure by deferring some of the inventory building ahead of the holiday by around 2 weeks.

Table: SGE 2017 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*

148.24

107.60

156.36

+37.8%

-5.2%

March

 192.25

183.24

213.35

 +4.9%

 -9.9%

April

 165.78

171.40

195.45

 -3.3%

 -15.2%

May

 138.08

147.28

162.15

 -6.2%

 -14.8%

June

 155.51

138.51

195.67

 +12.3%

-20.5%

July

 144.71

117.58

285.50

 +23.1%

 -49.3%

August

 161.41

144.44

265.27

 +11.7%

 -39.2%

September

 214.24

170.90

259.98

+25.4%

-17.6%

October*

 151.54

 153.25

176.29

 -1.1%

 -14.0% 

November

 189.10

 214.72

202.71

-11.9% 

  -6.7%

December

 185.21

 196.37

228.21

 -5.7%

    -18.8%

Full Year

 2,030.48

 1,970.37

2,596.37

 +3.05%

 -21.8%

*Short trading months due to Chinese national holidays

Source:  Shanghai Gold Exchange, www.Lawrieongold.com  

 

As we have pointed out here beforehand there is disagreement among analysts as to whether SGE withdrawal figures are a true measure of Chinese demand.  However we continue to point out that totalling up known gold imports from nations which publish country by country gold export figures, plus China’s own known gold production and making a small allowance for scrap conversion gives us a far closer total to the published SGE withdrawal figures than any other Chinese demand estimates which tend to ignore the substantial amounts being absorbed by Chinese banks and financial institutions.  So we continue to stand by our estimates equating SGE withdrawals to Chinese demand – a position that China’s Central Bank seems to agree with too.

Even though China’s economy may be flatlining at the moment it continues to be in an overall growth phase as it transforms its economy from an export driven system to a domestic-demand driven one.  The middle classes continue to grow in numbers thus enhancing demand for goods, but there is also an inbuilt propensity towards savings and gold and silver play an important part in this.  So we would anticipate gold demand in the nation to grow alongside the increase in domestic wealth. 

We also assume that the nation is surreptitiously enhancing its gold reserves, even though it claims them to be static.  The Chinese state-owned banks are believed to hold large amounts of gold bullion and these are almost certainly considered part of the nation’s gold reserve by the government and the Central Bank.  Yet these holdings do not fall into any category that they consider need to be reported to the IMF. and thus appear in the official gold reserve figure, -  unless, and until, there is seen to be political advantage in moving them into reportable accounts.

05 Jan 2018

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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