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LAWRIE WILLIAMS: SGE gold withdrawals down in Feb but up YTD

The Shanghai Gold Exchange has released its gold withdrawal figures for February – down on a year ago, but the cumulative year to date figure for the first two months of the year are marginally higher than in 2017 or 2016.  However not too much should be read into this as February withdrawal figures tend to be anomalous due to the timing of the Chinese New Year and the subsequent weel long holiday when the SGE is closed.  This year the Chinese New Year fell mid-month which meant the whole holiday period fell within February.  Last year the New Year was in late January and a couple of days of the ensuing holiday period will have fallen in that month, so it is probably invidious to compare February figures.  We will need to wait for March withdrawals to see how the full Q1 totals are matching up.

Table: SGE Monthly Gold Withdrawals (Tonnes)





% change 2017-2018

% change 2016-2018















































Year to date




+  2.8%


Full Year



Source: Shanghai Gold Exchange.  

Why are the SGE withdrawal figures important?  Some claim that SGE gold withdrawals equate to the country’s total gold consumption, although the major precious metals consultancies dispute this preferring rather to base their calculations on more limited demand data.  But, in our view SGE gold withdrawals , as one of the few regularly announced figures on gold from Chinese official sources are, at the very least, an indicator of the country’s demand trend for physical metal and on this basis Chinese gold demand is holding up well and perhaps advancing slightly over the two prior years.  However it is probably still well behind that of the record 2015 year when total gold withdrawals for the year reached just under 2,600 tonnes.

We still look on China as being the key to the overall global gold supply/demand balance, with the middle class element of Chinese Society (in other words the earnings bracket which tends to purchase small amounts of gold monthly as a form of savings) is still growing rapidly, while global new-mined gold supply may well have peaked in 2017.  China’s own gold production is said to have fallen by 9% in 2017 and given the Chinese gold market is a closed one in that what goes in stays there, this could presage a corresponding increase in gold imports this year to make up the difference caused by the Chinese production shortfall.

Recently we referred to the McKinsey analysis which suggested growth in the middle class element in Chinese urban society to around 76% by 2022, and with the urban proportion of the massive Chinese population of over 1.3 billion people also continuing to grow to more than half the country’s total, the Chinese middle classes already hugely outnumber the total population of the world’s richest nation, the USA.  True McKinsey sets the parameters for the Chinese middle classes at a seemingly low level by U.S. standards – at between $9,000 and $34,000 a year, but it has been pointed out to me that the Chinese pay no income tax, and with the cost of living lower too these figures are worth much more to the individual than equivalent earnings in say the USA or Europe.

Overall, as long as Chinese demand holds up – as it appears to be doing – and with Indian demand coming back in, although not yet to its earlier highs, but certainly well ahead of the very low 2016 figure, Asian gold demand remains strong, perhaps counterbalancing the fall in U.S. figures as seen in lack of physical demand for gold coins. Gold ETFs are showing mixed signals in terms of interest but the largest of all, GLD, is marginally down year to date (around 0.3% in tonnage of gold held) but not significantly so and given the recent fall in the gold price is actually holding up fairly well.  The gold price itself is just about flat year to date in dollar terms after being up around 10% at one stage, but it is early days yet and we would still not be surprised to see the yellow metal reach $1,400 plus during the year.

06 Mar 2018 | Categories: Gold

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