Chinese gold demand looks to have risen sharply in April

An edited version of an article first written for the Sharps Pixley website – to see original click here

Despite the latest analysis from the World Gold Council (WGC) which suggested a poorish start to the year for gold demand (See:  Q1 gold demand lowest for 10 years), Chinese demand as represented by gold withdrawals out of the Shanghai Gold Exchange (SGE) appears to have picked up well in April coming out at 28% higher than in 2017 and 24% higher than in 2016 (see table below).  They are still around 9% down on the record 2015 figure for the first four months of the year, but at least the trend appears positive when some other demand statistics appear to be slipping.

Indeed April 2018 gold withdrawals were actually comfortably higher than those in April 2015 too, but in the latter year gold withdrawals out of the SGE were particularly strong in the second half and totalled almost 2,600 tonnes for the full year – around 80% of total global new mined production.  We don’t expect this figure to be matched in the current year, but the latest Chinese figures look to be off to a good start and we could be heading for the best demand figures since 2015.

Table: SGE Monthly Gold Withdrawals (Tonnes)

Month   2018 2017 2016 % change 2017-2018 % change 2016-2018
January   223.58 184.41 225.08 +21.2%  -0.7%
February*   118.42 148.24 107.60 -20.1% +10.7%
March  192.61  192.25 183.24  +0.2%  +5.1%
April  212.65  165.78 171.40  +28.3% +24.07%
May  138.08 147.28
June  155.51 138.51
July  144.71 117.58
August  161.41 144.44
September  214.24 170.90
October*  151.54  153.25
November  189.10  214.72
December  185.21  196.37
Year to date   749.07 690.68 687.32 +  8.45% +8.98%
Full Year  2,030.48  1,970.37

Source: Shanghai Gold Exchange.  Lawrieongold.com

*February and October tend to be anomalous months because of week long holidays when the SGE is closed

Of course, as we have pointed out here previously it is a contentious issue as to whether SGE withdrawal figures are truly an accurate indicator of total Chinese gold demand.  The major precious metals consultancies come up with all kinds of differing reasons why this is not the case.  But in support of our views on this we should point out that SGE gold withdrawal figures seem to relate far better to the sum of China’s own gold production plus known gold imports, plus a reasonable figure for scrap supply and unquantified imports, than these same consultancies’ rather narrower estimates of Chinese annual gold demand.

The latest SGE figures thus do suggest that Chinese investment demand for gold bars and coins may be picking up – particularly as the gold price will have appeared weak at times which could have appealed to bargain hunters.  The prospects of a trade tariff war developing with the USA may also be driving Chinese citizens with disposable income (a part of the populace which is increasing all the time) to safe haven investment.  Furthermore,the huge falls in the value of cryptocurrencies will also have diminished interest in these as a safe investment asset which again may have turned the gold-loving Chinese back to the yellow metal.

The WGC Q1 report noted above does suggest that gold jewellery demand in China is picking up too and points to a continuing sharp global growth in technological demand – and China is at the forefront of the latter in that its high tech industries are becoming world dominant.

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