LAWRIE WILLIAMS: China’s H1 SGE gold withdrawals 973.1 tonnes

While Chinese gold demand remains a little muted so far this year, that is largely in relation to last year’s record withdrawals of gold out of the Shanghai Gold Exchange (SGE) as the guide.  By any other standards it still remains hugely significant.  For example, the latest announced SGE withdrawals figure for the six months to end June has come in at 973.1 tonnes – although this well below the 1,178.4 tonnes withdrawn over the same period in 2015, or down around 17% year on year. The latest month’s withdrawal figure was 138.5 tonnes – itself down 14.6% on last June’s figure.

Indian demand in terms of official figures is also down substantially so far this year, but here the waters are muddied in that smuggled gold into the country, to avoid the substantial tax impositions on imported gold, is  anecdotally very strong so no-one knows the true figure actually coming in to the country.  But even this may have fallen back given that one of the traditional routes for gold to be brought into India is via the United Arab Emirates and one suspects that the latest Swiss gold import figures, which show the UAE as the biggest exporter of gold to Switzerland in May, might suggest a degree of destocking by gold traders, implying a fall in normal demand coupled with perhaps a move also to take advantage of higher gold prices by reducing inventory. (See: Swiss gold data raises new doubts on London's gold stocks)

With Asian demand down, though, this has been very much replaced by Western demand through gold purchases into the major gold ETFs, put at somewhere north of 500 tonnes so far this year.  The two major U.S. gold ETFs – GLD and IAU - have added over 365 tonnes alone year to date.

There’s still little sign of Chinese demand picking up.  There may be a degree of sensitivity here to the rising gold price – the Chinese are notable for climbing into the gold market when they see prices as being low.  However the second half of the year can be a stronger period for Chinese demand, but even if there is a pick-up there seems little likelihood of it matching anywhere near last year’s massive 2,596.4 tonnes. The annual figure may well be heading for a sub-2,000 tonne level for the first time since 2012, although that year SGE withdrawals only totalled 1,139 tonnes which will be comfortably exceeded this year regardless.

05 Jul 2016

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