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LAWRIE WILLIAMS: China’s Gold Demand Picking Up but Still Well Down On 2021

The Shanghai Gold Exchange (SGE) has announced its gold withdrawal data for May which shows that demand during that month has almost, but not quite, picked up to the previous year’s level, after a couple of months of much lower withdrawal data.  We had put the fall-off down to the resurgence of Covid-19 infections in some major population and manufacturing centres and the draconian measures taken to control the spread of the virus, which had curtailed business severely in the infected areas.

Table: China SGE Monthly Gold Withdrawals 2020-2022 (Tonnes)

 Month

2022

2021

2020

% change 2021-2022

% change

2020-2022

January

185.51

159.49

110.87

+16.3%

+67.3%

February*

  92.43

 92.39

 28.99

      0%

 +218.8%

March

 103.79

 167.74

 82.27

 -38.1%

+26.15%

April

   83.74

 148.04

 95.80

 -43.4%

 -12.59%

May

103.12

 105.06

 69.18

   -1.9%

+32.9%

June

 

 132.80

 85.71

   

July

 

 110.61

 82.94

   

August

 

 149.95

 111.37

   

September

 

 190.87

 153.98

   

October*

 

 136.62

 94.28

   

November

 

 158.31

 127.65

   

December

 

 193.44

 162.30

   

Cumulative

568.59

672.72

370.17

-18.3%

+34.90%

Full year

 

1,745.70

1,205.33

   

 Source:  Shanghai Gold Exchange, Sharps Pixley.

*Months incorporating Golden Week holidays when SGE closed for a week

The pick-up in the SGE withdrawal figure for May confirms anecdotal evidence from China that the country seems to be bringing the latest Covid outbreak under control.  We are also beginning to see an uptick in gold exports to China again from countries which report these statistics on a regular basis, although not necessarily yet to prior levels.  China almost certainly remains the world’s largest gold producer in its own right from its own dedicated gold mining operations, plus a significant amount as a byproduct from its custom base metal smelting and refining activities.

China has been encouraging its citizens to buy gold as bullion, jewellery and in the form of artefacts as savings and it is believed that it considers these holdings as potentially contributing to the country’s overall total gold accumulations should these ever become a factor in a global currency re-alignment.  Likewise it is felt that the country’s own state=held gold reserves are substantially under-reported to the IMF. 

Under the IMF’s own gold holding rankings China is in 7th place overall as holding 1,948.3 tonnes (see table below)

Table:  Top 10 World Gold Reserves as reported to IMF (tonnes)

1

United States

8,133.5

2

Germany

3,357.6

3

IMF

2,814.0

4

Italy

2,451.8

5

France

2,436.6

6

Russia

2,298.5

7

Mainland China

1,948.3

8

Switzerland

1,040.0

9

Japan

846.0

10

India

761.3

Source:  IMF, World Gold Council

There is a fear, expressed in detail recently by China-focused economist and metals specialist Simon Hunt, that China, in conjunction with Russia, may try and introduce a gold and commodity-backed global currency to try and rival the dominant reserve status of the U.S. dollar. Indeed he reckons this is already set to go in concept. 

China is accepted as the world’s No.1 gold producer and many believe its true reserves are enormously higher than stated to the IMF.  By some estimates, Russia is No.2 in global gold production and at least No.5 in nationally held gold reserves, so in combination these two nations are already in a strong position as far as the precious metal is concerned.  Russia is also a prime producer of many in-demand metal commodities and China many other strategic metals which the world relies on.  The premise behind this new currency idea is that it would thus have some kind of secure backing, while the dollar has continually depreciated in value, thus enhancing the appeal of the new currency’s reserve status. If this new currency platform were to succeed,  perhaps up to half of the world could be trading without the U.S. dollar by the end of the next decade, implying the end of America’s 77 years of dollar hegemony, Hunt reckons.

08 Jun 2022 | Categories: Gold, China, Dollar, Russia, US

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