LAWRIE WILLIAMS: Much stronger month for Chinese gold demand in September

A little over 1 month ago we commented that it looked as though Chinese gold demand, as represented by gold withdrawal figures out of the Shanghai Gold Exchange (SGE), might be beginning to pick up.  The September figures – delayed due to the SGE’s shutdown at the beginning of October due to the national Golden Week holiday, seems to have confirmed this pattern with a 31.5% increase in the withdrawal figure over that for the same month a year ago, and more than 38% up on the August figure. However the September monthly total was still well down on that for the same month in 2018 suggesting that gold demand in the world’s top consuming nation is still hugely below that of the peak years of 2014-2017.

Table: SGE Monthly Gold Withdrawals 2018-2020 (Tonnes)

 Month

2020

2019

2018

% change 2019-2020

% change 2018-2020

January

110.87

218.54

223.58

-49.31%

-50.64%

February*

 28.99

  99.77

118.42

 -71.14%

-75.52%

March

 82.27

 218.03

192.61

 -62.27%

 -57.29%

April

 95.80

 151.89

212.64

 -36.93%

 -54.95%

May

 69.18

 123.11

150.58

 -43.81%

 -54.06%

June

 85.71

 107.45

140.59

 -20.23%

 -39.04%

July

 82.94

 129.33

137.41

 -35.87%

 -39.64%

August

 111.37

 107.73

190.59

 +3.38%

-41.57% 

September

 153.98

 117.08

188.12

 +31.52%

 -18.15%

October*

 

   91.15

142.94

 

 

November

 

 119.43

179.08

 

 

December

 

 158.50

178.04

 

 

Year to date**

821.08

1,279.93

1,554.54

-35.85%

-47.18%

Full Year

 

 1,642.01

2,054.54

 

 

             

 Source:  Shanghai Gold Exchange.

*Months incorporating Golden Week holidays when SGE closed

 

Assuming that demand is still picking up, we could well be heading for an annual total of around 1,200 tonnes, or a little higher.  That is less than half that achieved in the record 2015 full year but at least this year overall global gold demand has remained at a high level due to record flows into gold ETFs around the world, more than compensating for the fall-off in demand seen so far in the world’s top two gold con summing nations – China and India.  And if Chinese demand continues to recover as the country shakes off the disastrous effects of the coronavirus pandemic, which hit the nation particularly hard in the first quarter of the year.  China, if the official tallies are to be believed, has almost completely shaken off new incidence of the virus, with reported new infection rates and deaths almost infinitesimal compared with virus hotspots like the U.S., India and Brazil.  With its centralised political system, China has been able to impose draconian control levels in a manner that Western countries are unable to do.  Even so, the country’s reported figures seem almost too good to be true given its massive population.  Indeed virus death rates in the early months of virus prevalence are thought to have been massively under-reported.

Regarding flows into global gold-backed ETFs, the latest World Gold Council (WGC) research puts inflows at over 1,000 tonnes in the year to end-September.  Inflows have continued to advance in the latest couple of months, but at a slightly lower monthly rate due, perhaps, to the weaker gold price performance of late.  The WGC puts total gold ETF holdings at some 3.880 tonnes, a new all-time high – equivalent to US$235 billion in value. 

New mined gold output will also probably slip back this year,  It was already close to its peak, but was expected to rise a further 1-2% in 2020, but coronavirus- related precautionary measures at some mines will probably have contributed to a fall in global output.

15 Oct 2020

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).

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