China’s Shanghai Gold Exchange withdrawals continue strong with another 49 tonnes taken out in the week ended November 27th bringing the year to date total to just over 2,362 tonnes. For comparison the previous full year record total achieved in 2013 has already been exceeded by around 180 tonnes, with just over a month to go until this year end. We are downgrading our full year forecast to 2,580 tonnes from the previous 2,600 tonnes plus, but this would still be 18% higher than the previous record – and around 23% higher than last year’s total withdrawal figure.
Much is made in the West of the downturn in the Chinese economy – but this is a reduction in percentage growth – not a recession. Sometimes the two seem to be confused by the media. The Chinese middle classes are continuing to grow and employment is being pushed in the government’s economic reboot to the services and domestic consumption sectors which tend to pay higher wages than manufacturing and thus the disposable wealth within this ever growing population segment is growing rather than diminishing.
As one of the speakers at this week’s Mines & Money conference in London pointed out, for thousands of years China and India were the world’s richest countries – a position they mostly lost in the 19th and 20th centuries. They are becoming so again – a return to the status quo ante perhaps – and with their huge inherent disposition to accumulate gold (which has served their people well over the centuries as a store of wealth and protector against economic downturns and inflation) we can only see the gold acquisition trend continuing to build.
We are already close to the crunch situation in the supply/demand equation for gold and again, as a number of highly respected speakers suggested at Mines & Money, the gold price will go up, and likely go up very sharply, although none would really commit themselves on a timescale for this to occur. Perhaps the nearest was Pierre Lassonde who reckoned the U.S. Fed has talked itself into virtually having to start raising rates this month, or lose all credibility, but that it will be forced to backtrack before the middle of next year, cutting rates again – or even implementing QE4 – and this would be the trigger for the start of a gold perception resurgence. Grant Williams (no relation) talking at the same event somewhat concurred and commented that when gold does rise it will likely move rapidly and comfortably take out the previous all-time price high. Good fodder for the remaining gold bulls!