LAWRIE WILLIAMS: Chinese gold demand slipping - but still up y-o-y

Latest figures for November out of the Shanghai Gold Exchange (SGE) suggest that Chinese gold demand is slipping slightly as the year nears a close with gold withdrawals down compared with the same month for the past two years.  But cumulative demand for the year to date remains marginally higher indicating that gold demand remains on track to exceed 2,000 tonnes yet again for 2018 as a whole, but perhaps marginally lower for the full year than we were predicting earlier.  Our latest estimate for the full year is around 2,060 tonnes – around 30 tonnes higher than in 2017.

However, December figures could surprise us to the upside as it is a time that traders and fabricators build up stocks for what tends to be strong demand around the Chinese New Year.  This year this falls on February 5th – around 11 days earlier in the month than in 2018, which could boost December demand at the expense of January, which was a particularly strong demand month this year.

 

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

 188.12

 214.24

170.90

 -12.2%

 +10.1%

October*

 142.94

 151.54

 153.25

 -5.7%

 -6.7% 

November

 179.08

 189.10

 214.72

  -5.3%

 -16.6%

December

 

 185.21

 196.37

 

   

Year to date

1,876.58

1845.34

1774.00

+  1.7%

+5.8% 

Full Year

 

 2,030.48

 1,970.37

 

 

Source: Shanghai Gold Exchange.  Lawrieongold.com

* Months include week long New Year and Golden Week holiday periods

2019 is a year of the Pig which can be associated with wealth and good fortune, but mostly for those born under other Chinese zodiac signs.  It may, in Chinese interpretations, actually be a difficult year for other Pigs!  But they will likely get their rewards in succeeding years.

As we have noted here before, we associate gold withdrawal figures from the SGE with real annual Chinese gold consumption/demand.  At around 2,000 tonnes the figure equates far closer to the known sum of China’s own gold production, plus known gold imports from entities which break down their gold exports on a country-by-country basis (which include Switzerland, the U.K., the U.S.A, Australia and Hong Kong) plus an allowance for gold scrap conversion and unknown gold import sources. 

The slightly lower withdrawal figures we have seen year on year for the past three months do correlate with a slight fall-off in imports from the known gold exporters, and also to a reduction in the nation’s GDP growth pattern, although this is still on a path, according to Chinese official figures, which is the envy of most Western economies.  Whether President Trump’s tariff impositions will have much, if any, effect remain to be seen.  Despite an agreed 90 day delay in the imposition of additional tariffs, the American President is still playing hardball with aggressive tweets, but the two sides remain far apart.

06 Dec 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