SGE gold withdrawals pick up a little – but still way down on a year ago

The latest announcement on gold withdrawals out of the Shanghai Gold Exchange (SGE) for August saw an increase on July withdrawals, but they remain hugely (45.5%) below those for August last year, although admittedly July, August and September 2015 saw exceptionally high levels.  If we compare the August figure with 2014 it was still 10.8% down.  Year to end-August withdrawals from the Exchange were a massive 28.6% down on the same period of 2015, but only 1% down on 2014 levels when the full year total was a little over 2,100 tonnes, although the current trend suggests that this level may not be reached this year.

Some equate SGE withdrawal figures as equivalent to total Chinese gold demand, although others dispute this suggesting there is a degree of double counting involved.  But be this as it may we do have a pretty good handle on Chinese gold imports and together with China’s own gold output of around 450 tonnes a year, these come out as far closer to the SGE withdrawals figure than Chinese ‘consumption’ figures as estimated by the major precious metals consultancies.  The main difference is interpretation as to what is actually considered as ‘consumption’ which, for the mainstream analysts is a fairly specific universe which ignores gold imported for use by the financial sector.  To us this is till gold flowing into the Chinese mainland, and not coming out again, so should be incorporated in overall demand figures.

To put all this into perspective, China gold follower Koos Jansen, writing on www.bullionstar.com, last year estimated Chinese gold imports, mostly as reported by Switzerland, the UK, Australia, the U.S., Canada and Hong Kong, at 1,575 tonnes to which should be added China’s domestic gold production of around 450 tonnes and a degree of scrap at an estimated 225 tonnes – so an overall total of 2,250 tonnes.  In 2015 SGE withdrawals totalled 2,596 tonnes which is far closer to known gold supply from Jansen which he reckons to be probably a minimum.

Shanghai Gold Exchange Monthly Gold Withdrawals (Tonnes)

Month 2016 2015 2014 % change 2015-2016 % change 2014-2016 
January 225.08 255.42 246.00 – 11.8% -8.5%
February* 107.60 156.36 171.67 – 31.2% -37.3%
March 183.24 213.35 146.56 -14.1% +25.0%
April 171.40 195.45 129.59 -12.3% +32.2%
May 147.28 162.15 129.34 -9.2% +13.8%
June 138.51 195.67 128.03 – 29.2% +8.2%
July 117.69 285.50 137.53 – 58.8% -14.4%
August 144.44 265.27 161.95 – 45.5% -10.8%
September 259.98 202.43
October 176.29 201.11
November 202.71 212.49
December 228.21 235.66
Year to end August 1,235.24 1,729.17 1,250.67 -28.6% -1.0%
Full Year 2,596.37 2,102.36    

Source: Shanghai Gold Exchange, Lawrieongold.com 

*February withdrawals figures tend to be erratically low due to SGE closure during the Chinese New Year (Golden Week) holiday which this year was on the week commencing February 8th

But where does this all leave us in terms of Chinese gold demand this year.  We would suggest south of 2,000 tonnes according to the SGE figures.  With Indian demand also reported as sharply down so far this year the big Asian demand element is obviously slipping sharply, but this has been more than overshadowed by the vast pick-up in demand from the world’s gold-backed ETFs which the World Gold Council has estimated as being up by 679 tonnes to end-August.  What you lose on the swings one gains on the roundabouts (carousels to American readers!)

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