China’s huge gold demand figures - the Jansen viewpoint

As we’ve noted here before, following Koos Jansen’s blog on is perhaps the best way of keeping up exactly with what is going on in the Chinese gold market, and on Shanghai Gold Exchange withdrawal figures in particular.  He describes the latest weekly withdrawal figure we noted in an earlier article on this site (Chinese gold demand 70 tonnes w/ending Jan 16th), as being ‘incredible’, in part because the withdrawals were made at a time the gold price was rising sharply, but also because it was the third highest withdrawal figure on record.  The first few paras, and a couple of charts on his latest blog post, are shown below - as is a link to read his full article which adds additional insights into the place of Chinese gold demand in terms of the global supply/demand balance.

Withdrawals from the vaults of the Shanghai Gold Exchange (SGE) in week 2 of 2015 (12 – 16 January) accounted for an incredible 70 metric tonnes. Aggregated withdrawals in the first two weeks of this year stand at 131 tonnes.

Shanghai Gold Exchange SGE withdrawals delivery 2015 week 2, dips

Shanghai Gold Exchange SGE withdrawals delivery only 2014 - 2105 week 2, dips

Corrected by the volume traded on the Shanghai International Gold Exchange (SGEI), withdrawals in week 2 were at least 65 tonnes (read this post for a comprehensive explanation of the relationship between SGEI trading volume and withdrawals). Year to date withdrawals corrected by SGEI volume were at least 122 tonnes.

The numbers just mentioned are truly amazing, 70 tonnes withdrawn in one week is the third highest amount ever. Only in January 2014 when the Chinese were also buying gold for the Lunar year – but the gold price in renminbi was lower, and in April 2013 when the price of gold fell of a cliff, were withdrawals stronger than last week. This is important, as illustrated in the charts above the Chinese tend to buy gold when the price is declining, last week they bought like there was no tomorrow while the price was rising sharply. Now that’s strong demand! …

In perspective; 65 tonnes demand (the bottom limit) can only have been met by mine supply, scrap supply or import ../../../../2015/01/25/chinese-huge-gold-demand-figures-the-jansen-viewpoint/supply._Domestic_mine_production_was 8.7_tonnes.css; gold was not trading at a discount, but at a premium to London last week, which means scrap couldn’t have been abundant; estimating scrap that supplied the SGE at 4 tonnes leaves import ../../../../2015/01/25/chinese-huge-gold-demand-figures-the-jansen-viewpoint/to_have_been_at_least_52.3_tonnes__in_one_week.css). Nothing unusual if this would occur sporadically, but since 2013 China has net imported 2,838 tonnes for just non-government demand, continuously draining global above ground gold inventory – as world mine production is not sufficient. How long can this go on? Deutsche Bank estimates the PBOC imports an additional 500 tonnes a year, according to a report released in November 2014………

To read Jansen’s full article please click on this hyperlink

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