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LAWRIE WILLIAMS: China's SGE gold withdrawals strengthen ytd

Asian gold demand is key to global demand and we have now had a report from the World Gold Council suggesting a pick-up in Indian demand this year.  Taken together with a rise in Shanghai Gold Exchange (SGE) withdrawals over the first two months of the year, it appears that Asian demand may well be increasing again compared with a year ago, although still well down in China’s case from the record SGE withdrawal figures recorded in 2015.

One cannot take January or February’s individual monthly totals as a guide because of the variation in dates in the Chinese New Year holiday when the SGE is closed.  This year, the Lunar New Year came early, on January 28th, so it will have impacted on the SGE in both January and February, which is unusual as normally the New Year and the accompanying holiday occurs wholly in February so with fewer holiday days in February this year it shouldn’t be seen as surprising that the 2017 February withdrawals figure was higher than in both the record 2015 year and well above the 2016 figure, but taking January plus February figures, which will incorporate the full holiday period, we can compare like with like and draw some sensible conclusions on demand levels at this stage of the year.  This combined figure shows this year’s SGE withdrawals for the first two months of the year up 9.3% year on year compared with a year earlier, but still well down (nearly 12%) on the record 2015 year.  To see the comparative figures see the table below:

Table: Shanghai Gold Exchange 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*

179.24

107.60

156.36

+66.6%

+14.6%

March

183.24

213.35

 

April

171.40

195.45

 

May

147.28

162.15

 

June

138.51

195.67

 

July

117.58

285.50

 

August

144.44

265.27

 

September

170.90

259.98

 

October

 153.25

176.29

 

  

November

 214.72

202.71

 

  

December

 196.37

228.21

 

    

Year to date

363.65

332.68

411.78

+9.3%

- 11.7%

Full Year

 1,970.37

2,596.37

 

Source: Shanghai Gold ExchangeLawrieongold.com

*February figures always distorted by Chinese New Year holiday

It is too early to draw any real conclusions as to how this year will stack up in comparison with previous years, but it does at least show that Chinese demand is robust so far – something that became very apparent with the enormous gold flows from Switzerland direct to the Chinese mainland in December (See: China 154, Hong Kong 39. Swiss Dec gold exports show remarkable gold flows) which will mostly have moved through the SGE in January and February.

It’s probably worth disregarding gold flows from Hong Kong into mainland China these days, despite some media and analysts presenting these as a proxy for total Chinese gold demand.  They may well have been so a few years back but nowadays perhaps only account for 50-60%, perhaps less, of Chinese gold imports.

As we pointed out here only 3 weeks ago (See: China gold demand much greater than major analysts tell us) there is much unintentionally misleading data published on Chinese gold flows.  We would tend to concur with China watcher Koos Jansen of www.bullionstar.com that SGE withdrawals provide a better estimate of Chinese gold flows than other analyses.

08 Mar 2017 | Categories: Gold, China

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