The Shanghai Gold Exchange’s announcement of the full year figure for gold withdrawals for calendar 2015 show that a huge new record of 2,596.4 tonnes was taken out – 19% higher than the previous record of 2,182 tonnes recorded in 2013. This is just short of the 2,600 tonnes we had been estimating. In the four days of trading in the final week of the year 40.94 tonnes were withdrawn – suggesting around 50 tonnes for a full 5-day week including Jan 1st – which is pretty much on par with other recent weekly withdrawal figures despite any minor disruption from the big Christian Christmas holiday period which has little, but possibly some very minor, impact on Chinese domestic trade. This time of year does seem to see strong gold withdrawal levels from the SGE in the buildup to the Chinese New Year – a traditional time of gift giving in the Middle Kingdom of which gold ornaments and jewellery tend to figure strongly. This year the Chinese New Year falls on February 8th.
Here’s Nick Laird of Sharelynx’s chart setting out the SGE withdrawal figures for the past eight years, which demonstrates nicely the huge (and very consistent apart from a blip in 2014) upwards trend in withdrawals as China’s economy has continued to grow and individual purchasing power has grown with it. The growth in the economy may be slowing down, but it is still growing at a rate which any Western Government will envy enormously.
While the Chinese central bank – the People’s Bank of china (PBoC) – seems to equate SGE withdrawals to total Chinese demand, Western analysts tend to suggest that the actual figures are considerably lower and come up with various, and differing, reasons for the possible discrepancy. Indeed their consumption estimates may well prove to be around 1,500 tonnes lower than those the SGE withdrawals figure might suggest.
As we have noted before, a significant proportion of the difference is down to how the analysts estimate ‘consumption’. Demand categories such as gold used in financial transactions tends to be ignored by the analysts, yet this is still gold flowing into China and in terms of gold movement from West to East remains hugely relevant.
But these same western analysts also seem to ignore the evidence of known Chinese gold import figures and China’s own gold production. Together these look as though they will have totalled just short of 2,000 tonnes in 2014. It seems strange that in the age old argument as to which country is the world’s largest gold consumer – China or India – that the analysts pretty well equate India’s reported gold imports as that nation’s consumption, while not applying the same principle to China’s known gold imports plus its own domestic gold output (reckoned to be around 470 tonnes in 2015).
Whatever the analysts may suggest, SGE withdrawal levels in comparison with previous years, have to be a good indicator of total Chinese demand (excluding Central Bank purchases which apparently don’t go through the SGE). Thus it appears Chinese gold demand remains very strong indeed despite the sharp fall in the country’s GDP growth over the past year.
Chinese Shanghai Gold Exchange (SGE) physical metal withdrawals are at an all-time high having already this year exceeded the full year total for 2013 – the previous record year.
Furthermore, the amount of gold being taken out of SGE vaults is rising again as we draw nearer to the year-end with the latest figure for the week ending Nov 20th at 54 tonnes bringing the year to that date total to a massive 2,313 tonnes (as compared with the previous record 2013 full year total of 2,181 tonnes). The year to date figure is equivalent to around 80% of current global new mined production on its own.
If gold withdrawals from the SGE continue at the current rate until the year end then the annual figure would come out at just under 2,600 tonnes – nearly 20% higher than in the previous 2013 record year
Readers may recall that SGE gold withdrawals were huge in the run up to the Golden Week holiday in September, hitting well over 60 tonnes a week (over 70 tonnes on three occasions) in several weeks in July, August and September, but following the holiday they dropped back to the 40s although still remaining at a substantial level for the time of year. But recent weeks have seen deliveries beginning to rise again. The year-end period tends to see strength in SGE withdrawals as jewellers and fabricators start to stock up for the demand that comes ahead of the Chinese New Year which next year falls on February 8th (a Monkey year in the Chinese zodiac). The New Year is a time of gift giving and invariably sees a further surge in gold demand so it would not be unreasonable for weekly withdrawals to continue to increase and perhaps peak again in January.
Here’s Nick Lynn of www.sharelynx.com’s latest year to date SGE gold withdrawals chart demonstrating the big increase on prior year figures at the same stage.
The latest week’s figures on Shanghai Gold Exchange withdrawals see that the Chinese demand for gold remains enormous. It may have been exaggerated a little due to the prior week being a short trading one due to the Chinese holiday which kept the Exchange closed on the Friday and Saturday, but even so the latest week’s SGE withdrawals totalling 73.7 tonnes for the week ended September 11th is one of the highest single week figures on record – and brings this year’s total to date to just short of 1829 tonnes. This is fully 241 tonnes higher than at the same time in 2013 when the annual SGE deliveries figure was a huge new record, and 498 tonnes higher than last year – the second highest ever year for SGE withdrawals.
Surely there is some connection here between the reported rundown in COMEX Registered gold stocks and the recent backwardation in gold in London – a truly unsusual occurrence – which has been noted recently? Physical gold is very definitely flowing east – and by the SGE figures at an increasing rate. Once again we re-iterate that whether SGE withdrawals are an accurate representation of Chinese gold consumption as some Chinese officials tell us they are certainly a terrific indicator of the continuing Chinese thirst for the yellow metal.
Once again we publish the latest chart from Nick Laird’s sharelynx.com website comparing the latest SGE physical gold withdrawal figures with those at the same time in previous years showing how Chinese gold interest, if anything, is accelerating as its middle class continues to grow.
As we have noted before it looks like the SGE may be headed for a huge new record in physical gold withdrawals this year – particularly given that the final two months of the year are usually among the strongest for SGE deliveries and the current part of the year usually among the weakest. The latest projection for the full year total is 2,600 tonnes plus which represents around 80% of global new mined gold supply. If the current weekly rate holds up for the remainder of the year this percentage could be even higher. With Russian central bank purchases also high, and Indian demand to take into account to, its not surprising that Western gold stocks appear to be running down.
Another week’s gold withdrawal figures from the Shanghai Gold Exchange (SGE) and it appears that the demand momentum is holding up – if not accelerating. The latest figures are from the week ending August 14th with the Exchange reporting flows of 65.3 tonnes out . This is an enormous figure for an August week when historically Chinese demand is usually at its lowest and follows several weeks of plus 50 tonne withdrawals at a time of year when 30 tonnes would normally be seen as a strong figure.
There are reports that demand has slowed over the past week given the recent recovery in the gold price, with Shanghai premiums falling accordingly, so the next week’s withdrawal figures will be viewed with additional interest to see if this really is the case, or whether Chinese overall ‘demand’, as expressed by SGE is still holding up well.
The latest figure for total SGE withdrawals for the year to date is now a massive 1,585 tonnes, fully 161 tonnes more than in the record 2013 year at the same time – see www.sharelynx.com chart below. A quick calculation of SGE withdrawals to date (close to 50 tonnes a week so far this year), if extended over the full year would suggest a total figure for 2015 at over 2,500 tonnes – hugely higher than the record 2013 figure of 2,181 tonnes. While one should perhaps regard a continuing weekly withdrawal rate of 50 tonnes as being an optimistic projection, it is also worth bearing in mind that SGE withdrawals are usually far stronger in Q4 than in Q3!
With the Chinese Central Bank now reporting its own monthly gold accumulations – 19 tonnes in July and these apparently are additional to the SGE reported figures, and Russia continuing to expand its gold reserves – another 12 tonnes in July – and Indian imports rising sharply according to latest Swiss gold export data, global physical gold demand appears to be running well ahead of new mined supply, although whether that makes any difference at all in a paper-gold futures led market is perhaps doubtful. But with fear stalking the Dow after a huge week of falls (around 530 points on Friday alone), and general stock market indices around the globe a sea of red, maybe at last gold sentiment is beginning to get a safe-haven boost with worries about a general worldwide stock market meltdown.
Contrary to some of the expressed media-disseminated information Chinese physical gold demand, as indicated by gold withdrawals from the Shanghai Gold Exchange (SGE), remains at a very high level indeed for the time of year. The latest figure for withdrawals for the week ended August 7th was 56 tonnes, bringing the total for the year to date to a massive 1,520 tonnes. This is a full 135 tonnes higher than the previous record for Chinese gold demand at the same time of year – back in 2013.
A particular feature of this year’s SGE withdrawal figures has been the continuing strength of demand so expressed through the Summer months when demand normally falls away. This year weekly demand over the period has been mostly above the 50 tonne mark – indeed it was well over 70 tonnes just three weeks ago – and this is at a time of year when 30 tonnes plus normally represents a strong demand week on the SGE! See chart below from www.sharelynx.com.
If one checks out the weekly withdrawals bar chart (the lower section) one can see just how strong recent movement through the exchange has been in comparison with previous years.
Interestingly the Chinese Central Bank – the Peoples Bank of China (PBoC) – has also now started to report monthly updates in its gold reserves (see China gold reserves up 19 tonnes in July. Really?!) which could be seen as adding to overall Chinese demand, although many Western analysts are unconvinced about the accuracy of PBoC statements regarding the size of the nation’s real gold reserves.
The big question may well be has the recent devaluation of the yuan against the dollar, coupled with the admittedly fairly small gold price recovery to date, started to redress sentiment in the gold market in the West where prices are set. There is news now of some of the big bullion banks taking deliveries of physical gold on their own account, and also of shortages of registered gold available for delivery in COMEX warehouses having to be ‘rescued’ from dangerously low levels by a major reclassification of a big hunk of gold from the Eligible to the Registered category by JP Morgan. Is the tide turning at last? This could presage a very interesting second half of the year in the gold markets of the world.