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LAWRIE WILLIAMS: Chinese gold demand up over 15% YTD

 Perhaps the biggest unknown in assessing global gold consumption in this, or any, year is the true level of Chinese gold consumption.  The major analytical consultancies like Metals Focus, GFMS and CPM Group all tend to come up with Chinese gold consumption figures based on relatively narrow definitions of demand.  Yet these figures tend to be substantially lower than known gold imports from those countries which break these down in their own export statistics.  We have preferred to measure Chinese demand by Shanghai Gold Exchange withdrawal numbers, which tend to be far closer to the known Chinese gold import figures, plus China’s own gold production with an allowance for an element of scrap supply.  The consultancies will all come up with a variety of often different reasons why SGE withdrawals are not representative of true Chinese demand – but we’ll stick to them as our measure given their correlation to known gold flows into mainland China.

On our latest assessment – see: Chinese SGE gold demand UP in September – demand as represented by SGE withdrawals is indeed running rather higher than a year ago, a fact that mow appears to be borne out by the latest figures from the China Gold Association.  These suggest that in the nine months to end-September, Chinese demand for gold bars and jewellery was sharply higher than for the same period a year earlier.  According to the Association consumption of gold bars went up 44.45% to 222.07 tonnes, while that for gold jewellery rose 7.44% to 503.87 tonnes with total consumption up 15.49% to 815.89 tonnes suggesting an annual total of well above 1,000 tonnes given demand tends to pick up ahead of The Chinese New Year.  

Although the China Gold Association figures show a very positive increase in the nation’s gold  consumption year-on-year, we still feel it falls well short of total gold flows into Chinese hands as represented by reported imports plus China’s own gold production – although the latter is seen as falling by some 3.76% over the first nine months of the year.  The Association attributes the production fall on new rules to raise environmental requirements on solid waste from gold prospecting, leading to a wave of gold mine closures and output declines in the major producing provinces, including Shandong, Jiangxi and Hunan.

It will be interesting to see if the apparent increase in consumption is also reflected in the October SGE withdrawal figure – probably due out next week.  October tends to be a short month for the SGE statistics as the exchange was closed for the Golden Week holiday – although this will have applied to previous years as well.

01 Nov 2017

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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