China gold demand picking up strongly this month

Contrary to a number of media reports telling us China demand for gold has collapsed, and also that premia on the Chinese gold markets have turned to discounts, the latest figures out of Shanghai belie these statements.  For the latest week for which figures are now available (ended June 12th) 46.151 tonnes of gold have been withdrawn from the Shanghai Gold Exchange – an extremely strong figure for a time of year when seasonality of demand tends to see withdrawals in the high 20s or low 30s of tonnes – see the excellent chart of weekly withdrawals from Nick Laird’s Sharelynx.com website from 2009 to date below:

SGE week

 

The latest withdrawal figures suggest that Chinese gold demand as indicated by the SGE figures, is heading for a new record half year level of perhaps close on 1,150 tonnes – the levels are certainly running higher at the moment than they were in 2013 and 2014 – the highest years on record for SGE gold withdrawals.  And with the typical Chinese gold demand pattern seeing particularly high figures from about September onwards, portents are good for demand to surge yet higher again this year.

As we have pointed out here before there are arguments out there over whether SGE withdrawal figures represent Chinese total gold demand or not with most mainstream Western analysts coming up with much lower figures for Chinese wholesale gold consumption.  Koos Jansen of www.bullionstar.com, who follows these matters perhaps in more detail than anyone, is adamant that SGE gold withdrawals do approximate closely to real Chinese gold demand – and they certainly are at the very least a proxy for Chinese gold flows now actual import figures are clouded by the direct imports through centres other than Hong Kong, which are not reported by the Chinese authorities.  We have been calculating that perhaps around 40% of Chinese gold imports are now coming in directly rather than via Hong Kong which makes the Hong Kong figures, as reported by the mainstream media, no longer indicative of total Chinese demand.

So Chinese gold demand, as represented by the latest SGE figures, seems to be alive and surging – rather than at death’s door as most media headlines would have us believe.  Do read my article on Mineweb entitled Gold: The US sets the price but Asia does the buying for further thoughts on what I see as an enormous anomaly in gold pricing today.  It will be interesting to see if the Bank of China joining the LBMA price setting participants helps address this balance.

 

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