LAWRIE WILLIAMS: Shanghai gold deliveries surpass 2,000 tonnes already this year

The latest announcement from the Shanghai Gold Exchange covers gold withdrawals for the 2 week period ended 9th October and amounted to 50.89 tonnes bringing the total for the year to date to 2008.5 tonnes.  The fact that this was a 2 week period might suggest a sharp fall of deliveries from the Exchange but it should be recognised that the SGE was closed for a full week of public holidays in China over the period.  While this does indeed represent a slowing down of SGE withdrawals compared with previous weeks in July, August and September when they had been averaging just over 60 tonnes a week, they are still running extremely high – in fact hugely ahead of the record 2013 year at the same time and still on track to reach a massive 2,600 tonnes plus for the year.

While there are always continuing arguments about how representative SGE gold withdrawals are relative to actual Chinese consumer demand – the latest suggestion being that the carry trade in  gold using it as security for obtaining cheap dollar loans in the West and using these to take advantage of high interest bearing Chinese yuan notes -  See: Best Answer Yet to Great SGE Gold Withdrawals Anomaly? could be very substantial indeed.  This potentially creates the anomaly in Chinese consumption estimates by the major precious metals analytical consultancies as they do not record such financial usage of gold in their consumption estimates.

Unless this carry trade in gold starts to unwind – which becomes a possibility if the yuan is devalued further against the US dollar – this remains part of the recorded gold flow from west to east.  This obviously is one possible scenario for the relative differences in consumption estimates though – there are other theories out which could perhaps account for the differences in Chinese consumption estimates and perhaps it is an accumulation of all these which is at play here.

But be this as it may – the SGE withdrawal figures this year have been enormous.  At around the same time in 2013 – the record year for Chinese demand either in terms of SGE withdrawals or the assessments of the mainstream analytical consultancies – SGE withdrawals totalled only 1709 tonnes almost 300 tonnes less than in the year to date.  Last year (the second best year ever of SGE withdrawals) , at the same time (end of week 39) the SGE figure was only 1427 tonnes – over 580 tonnes less than this year’s figure.  This suggests a huge upturn in Chinese consumption in some form or another.

19 Oct 2015

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