China gold – positive news on all fronts

Linked below are two articles I have posted recently on the Sharp Pixley website – both on the latest state of play in the Chinese gold markets.  The first of these looks at gold withdrawals from the Shanghai Gold Exchange (SGE), which some observers equate to the real level of Chinese gold demand being somewhat higher than that suggested by the major Western consultancies which have perhaps more limited criteria on what should actually be included in the demand figure.  We have noted beforehand, quite frequently in fact, that SGE gold withdrawal figures equate far more closely to the total of known gold imports from countries/areas which break down their gold export statistics by country of destination, plus China’s own gold output plus an allowance for scrap and from unpublished import data than the estimated Chinese consumption figures by the consultancies.

Be this as it may, for the first five months of the year, SGE withdrawals are up by 8.55% on the figure at the same time a year ago and up 7.79% on the first five months of 2016 .  We speculate further that if we add Hong Kong consumption to that of the Chinese mainland this account for around 70% of all new mined gold, and with the continuing growth in numbers of the Chinese middle classes, and the continually rising national GDP, gold demand is likely to be on the increase given the propensity of the Chinese middle class population to buy precious metals as a hedge Ginat difficult financial times.  A link to that article is as follows:

Chinese gold demand continues to rise yoy

My second article in the past week on Sharps Pixley noted that the total reported amount of gold in China’s forex reserves, as reported monthly to the IMF, remains unchanged as it has done now for nineteen successive months – indeed ever since the Chinese yuan, or renminbi, has been accepted as an integral part of the IMF’s Special Drawing Right.  We think this situation is highly unlikely given indications over the years from Chinese politicians and academics that the country is aiming to at least match the gold reserves of the Big Western national gold holders.

China has a track record of announcing big gold reserve increases only at multi-year intervals and putting this down to gold being purchased and held in non-reportable accounts until moved into its official forex figures.  Again, we speculate that this gold may be being purchased and held by the state-owned commercial banks on behalf of the People’s Bank of China and only moved into the PBoC reportable accounts at say five or six year intervals.  A link to this article is:

China official gold reserves unchanged again as forex holdings dip

Another piece of positive news on Chinese gold demand came from the World Gold Council which reported a return to growth in Chinese gold jewellery demand.

Market Update: China’s jewellery market – quietly improving

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