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LAWRIE WILLIAMS: Chinese SGE gold demand UP in September

Seemingly contrary to some other media reports, Chinese gold demand, as measured by Shanghai Gold Exchange (SGE) gold withdrawals is picking up, not falling.  In September withdrawals were 25% higher than in 2016, although again well below those recorded in the record 2015 year.  Withdrawals year to date are also 7% higher than a year ago suggesting a full year total of over 2,100 tonnes assuming the rate of increase is sustained over the final quarter of the year.

We can expect a lower withdrawals level in October with the country’s Golden Week holiday – the first 7 days of the month – meaning the SGE was closed over this period, but historically withdrawal figures pick up over the final quarter overall in the run up to the Chinese New Year holiday which, next year, falls a little later on February 16th.  (In 2017 this fell on Jan 27th being based on a lunar cycle).  Again the country’s business sector effectively shuts down for a full week for the New Year holiday.  This later date next year could lead to a slight reduction in Q4 SGE withdrawals, but higher withdrawals in January as jewellers and fabricators stock up ahead of the start of 2018 – a Dog year.

A table of SGE withdrawals on a month by month basis for this year and the prior two years is set out below:

Table: SGE 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*

148.24

107.60

156.36

+37.8%

-5.2%

 

March

 192.25

183.24

213.35

 +4.9%

 -9.9%

 

April

 165.78

171.40

195.45

 -3.3%

 -15.2%

 

May

 138.08

147.28

162.15

 -6.2%

 -14.8%

 

June

 155.51

138.51

195.67

 +12.3%

-20.5%

 

July

 144.71

117.58

285.50

 +23.1%

 -49.3%

 

August

 161.41

144.44

265.27

 +11.7%

 -39.2%

 

September

 214.24

170.90

259.98

+25.4%

-17.6%

 

October

 

 153.25

176.29

 

  

 

November

 

 214.72

202.71

 

  

 

December

 

 196.37

228.21

 

    

 

Year to date

1504.63

1406.03

1989.15

+  7.1%

- 24.4%

 

Full Year

 

 1,970.37

2,596.37

 

 

 

Source: Shanghai Gold Exchange, Lawrieongold.com

While there are mixed views as to whether SGE withdrawals are an accurate measure of Chinese gold demand or not, they do provide a consistent guide to the demand element when figures are compared with prior years.  This year’s figures to date certainly suggest that demand may well be picking up a little in comparison with the rather weak 2015.  Interestingly the gold price trended higher in China today, possibly presaging another run at the $1,300 price level, which could well be a reaction to what could be seen as positive SGE figures given some of the negative press coverage on Chinese demand of late, largely based on the latest weak Hong Kong net export figures to the mainland.  However, as we have pointed out before, the Hong Kong figures can no longer be considered a proxy for gold movements into China as ever greater amounts are being imported directly into the Chinese mainland bypassing Hong Kong altogether.  Hong Kong nowadays may well account for less than 50% of all Chinese gold imports, on top of which the nation also produces around 450 tonnes of gold annually, around 60% more than either Australia or Russia – respectively the world’s No. 2and 3 producers last year.

12 Oct 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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