LAWRIE WILLIAMS: China’s November gold demand slips even further
China’s November gold demand falls even further
The latest gold withdrawal figures for November from the Shanghai Gold Exchange (SGE) suggest that the downturn we have been seeing in Chinese gold retail gold demand in recent months is not only continuing, but getting worse. This is probably an indication that the spate of Covid-related lockdowns that have prompted anti-government demonstrations in a number of population centres are perhaps having even more of an impact on the Chinese economy than many Western observers had even realised. Perhaps the recently announced relaxations will put demand back on track again in time for the Chinese New Year celebrations which next year falls on January 22nd and is a Rabbit year.
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 |
140.13 |
132.80 |
85.71 |
+5.5% |
+63.5% |
|
|
July |
160.77 |
110.61 |
82.94 |
+45.3% |
+93.8% |
|
|
August |
166.12 |
149.95 |
111.37 |
+9.7% |
+32.96% |
|
|
September |
179.84 |
190.87 |
153.98 |
-6.13% |
+14.3% |
|
|
October* |
98.48 |
136.62 |
94.28 |
-27.2% |
+4.4% |
|
|
November |
115.44 |
158.31 |
127.65 |
-27.1% |
-9.57% |
|
|
December |
193.44 |
162.30 |
||||
|
Cumulative |
1,429.37 |
1,551.88 |
1,043,04 |
- 7.89% |
+37,03% |
|
|
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
As can be seen from the month-by-month comparison table above, it now looks as though 2022 SGE gold withdrawals are now going to fall comfortably behind those for 2021, and hugely below the peak years from 2013 to 2017 when they totalled over 2,000 tonnes annually. However China will still retain its place as the world’s dominant gold consumer – and there remains the suspicion that the nation’s central bank continues to buy substantial amounts of gold for its reserves without reporting these purchases to the International Monetary Fund, although it has recently been reported that it has announced the purchase of a 32 tonne boost to its gold reserves last month! It is reckoned to be able to surreptitiously add to its reserves as the nation almost certainly remains the world’s No.1 gold producer from its own gold mines and from byproduct gold from its custom base metal smelting and refining industry and is thought to export none of this domestically-produced bullion. It could be adding upwards of 300 tonnes of gold a year to reserves from these sources without these statistics impacting the globally assessed figures.
The Chinese people certainly have a propensity to buy gold for savings and for gifting, and indeed have been encouraged to do so, but as we noted above, disposable incomes have almost certainly been hit by Covid-related lockdowns in key industrial areas with many workers confined to their homes and unable to get to their places of work. The downturns in Western economies also, which have been the key export markets for Chinese manufactured goods, have also reduced substantially due to belt tightening, and this is already becoming evident in global trade statistics. All this will be impacting Chinese corporate profits and individual earnings adversely, and will likely continue to do so as global economies attempt to weather the current recessionary trends.
Overall we now anticipate Chinese retail gold demand falling to perhaps as low as around 1,600 tonnes this year, or possibly even lower, in 2023. The country will still remain the world’s largest gold consumer, but India is playing catch-up again and may not be far behind in the years ahead if China’s economic growth continues to falter.
