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LAWRIE WILLIAMS: Chinese gold demand on the rise .

Contrary to media reports suggesting weak Chinese gold demand based primarily on a big fall in gold imports from Hong Kong, the latest gold withdrawal figures out of the Shanghai Gold Exchange paint a very different picture. August gold withdrawals came to just short of 191 tonnes compared with 161 tonnes for the same month a year earlier and 144 tonnes in August 2016. Year to date SGE gold withdrawals at 1,366 tonnes are around 6% up on the first 8 months of 2017 and over 10% up on the corresponding 2016 figure. If this advantage is maintained for the remainder of the year the full year figure could well be in excess of 2,150 tonnes – and bring the full year total close to the second best year for SGE gold withdrawals ever.

 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

 212.64

 165.78

171.40

 +28.3%

+24.1%

May

 150.58

 138.08

147.28

 +9.1%

 +2.2%

June

 140.59

 155.51

138.51

 -9.6%

 +1.5%

July

137.41 

 144.71

117.58

 -5.0%

 +16.9%

August

 190.59

 161.41

144.44

+18.1% 

 +32.0%

September

 

 214.24

170.90

 

 

October*

 

 151.54

 153.25

 

   

November

 

 189.10

 214.72

  

  

December

 

 185.21

 196.37

 

    

Year to date

1,366.43

1290.46

1235.13

5.9%

+10.6

Full Year

 

 2,030.48

 1,970.37

 

 

Source: Shanghai Gold Exchange.  Lawrieongold.com 

* These months include week long New Year and Golden Week holiday periods

 But back to the Hong Kong figures. The media made great play of the fact that July gold exports from Hong Kong to Mainland China were substantially down on the previous month - China's July net gold imports via Hong Kong plunge 45 pct m/mwas the Reuters headline - and the article went on to make the very out-of-date comment that the Hong Kong figures serve as a proxy for total Chinese gold imports, which they have not done for some years now. Judging by known gold export figures from countries which report these it is doubtful whether even half mainland China’s gold imports are routed through Hong Kong nowadays. The greater part now comes in via Beijing and Shanghai and perhaps other ports of entry.

It is true, though, that perhaps July was a weakish month for Chinese gold demand – but not significantly so as shown in the SGE withdrawal figures above. And, of course, August figures are likely to be much stronger with SGE gold withdrawals that month the highest for 3 years, although still well short of the record 2015 figure when withdrawals from the SGE totalled over 260 tonnes. In August.

Gold imports into China can be somewhat obscure, particularly where they involve the import of gold bearing concentrates for refining from Chinese-owned and other properties which have implemented deals direct with Chinese refiners. The latest of these is probably Polymetals’s big new Kyzyl gold mine in Kazakhstan which has just started up and is shipping its gold concentrate directly into the Chinese mainland for refining. This is a world class operation and will, on its own, produce around 10 tonnes of gold a year from 2019. While 10 tonnes is not a hugely significant amount of gold in the context of annual Chinese gold imports, it will not show up in easily monitored statistics like those from Switzerland, Hong Kong, the UK, the U.S. and Australia all of which break down their gold exports on a country-by country basis. It is the sum of known gold imports, plus China’s own production (China is comfortably the world’s largest producer of gold) plus an allowance for scrap and imports from unknown sources as being close to the SGE annual withdrawals total which leads us to equate SGE gold withdrawals to Chinese total annual demand which should yet again total over 2,000 tonnes this year.

With the low gold price also seen as boosting demand in India, the world’s second largest gold consumer which, according to GFMS, has just recorded particularly strong gold imports in August – apparently a 15-month high, gold is perhaps performing more strongly than its COMEX-manipulated price might suggest. Hang in there. There should be better times ahead.

06 Sep 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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