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LAWRIE WILLIAMS: Chinese gold demand continues to rise yoy

China’s Shanghai Gold Exchange, through which all gold demand transactions pass. Has just announced its gold withdrawal figures for May, and they continue to show a rising demand trend over figures released at this time in 2016 and 2017.  May withdrawals this year, for example, were 9% up on the May 2017 withdrawal figure and the cumulative total year to date is also 8.6% on a year ago when full year withdrawals amounted to 2,030.48 tonnes.  A continuation of the current trend would put this year’s total at around 2,200 tonnes or higher – the largest annual withdrawal figure since the record 2015 year when SGE withdrawals totalled just short of 2,600 tonnes.

As we have noted before there are contentious views on whether SGE gold withdrawals truly represent Chinese gold demand as they suggest figures far in excess of the Chinese gold consumption data estimated by the major precious metals analytical consultancies.  However they are much more in line with known Chinese gold imports, plus China’s own gold production, plus an allowance for scrap recycling.  China precious metals watcher Koos Jansen avers that SGE withdrawals are equal to real Chinese demand and cites figures in the China Gold Yearbook, which equate SGE gold withdrawals to true Chinese demand to support his viewpoint.

Table: SGE Monthly Gold Withdrawals (Tonnes)

Month

  2018

2017

2016

% change 2017-2018

% change     2016-2018

January

  223.58

184.41

225.08

+21.2%

 -0.7%

February*

  118.42

148.24

107.60

-20.1%

+10.7%

March

 192.61

 192.25

183.24

 +0.2%

 +5.1%

April

 212.65

 165.78

171.40

 +28.3%

+24.07%

May

 150.58

 138.08

147.28

 +9.1%

 +2.2%

June

 

 155.51

138.51

 

 

July

 

 144.71

117.58

 

 

August

 

 161.41

144.44

 

 

September

 

 214.24

170.90

 

 

October

 

 151.54

 153.25

 

   

November

 

 189.10

 214.72

  

  

December

 

 185.21

 196.37

 

    

Year to date

  899.65

828.76

834.60

+  8.55%

+7.79%

Full Year

 

 2,030.48

 1,970.37

 

 

Source: Shanghai Gold Exchange.  Lawrieongold.com 

Whatever the truth of the matter, the fact that SGE gold withdrawals equate much more closely to known gold imports to the Chinese mainland from countries which detail their export statistics like Switzerland, the U.K., the U.S., Australia etc. plus gold flows from Hong Kong, suggests that the SGE figures are at worst a great guide o overall Chinese gold demand.

Arguably too, given that Hong Kong is actually a part of China, although treated separately in terms of statistics as a Special Administrative Region, to provide a true figure for Chinese consumption we should probably add in the Hong Kong figure to provide a more realistic total for true Chinese annual gold demand.  This would make it even higher and bring the overall figure probably to the equivalent of around 70%, or higher, of global new mined gold output.  With the Chinese middle class expanding and GDP rising and the propensity of the Chinese to buy gold as a wealth protector, this proportion of global new mined gold output is likely as not to continue upwards, particularly if peak gold, or thereabouts, is now with us as most analysts suggest.

07 Jun 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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