It now looks as though Q1 gold withdrawals from the Shanghai Gold Exchange (SGE) will have reached around 623 tonnes – a 10.5% increase on last year’s record figure of 564 tonnes. The actual figure for the week ending March 27th (no Easter holiday in China) was just under 46 tonnes and that for week ending April 3rd 40 tonnes making the Q1 figure around 623 tonnes (assuming even daily figures across the week).
While mainstream analysts seem to discount SGE withdrawals as being a true representation of actual Chinese demand – although China gold watcher Koos Jansen is adamant from his questioning of Chinese officials that SGE withdrawals and Chinese gold demand are in effect the same. The argument continues. But be that as it may SGE withdrawals, whether the same as total Chinese demand or not, are very certainly a strong indicator of year on year Chinese gold flows, so it is very apparent from the latest figures that Q1 demand is very likely to be substantially higher than a year earlier.
It should be recalled though that last year, although Q1 SGE withdrawals reached the previous record level for the period, full year figures fell short of those for 2013 as demand tends to dip through the middle months of the year and in 2014 the mid-year dip was far greater than a year earlier, although the tail end of the year was particularly strong. It had been thought perhaps that the higher gold prices of the week of March 27th might have put a bit of a dent in Chinese demand, which can be affected by gold price levels, but it obviously still remained strong.
Gold today has pulled back from the latest rise which appears to have resulted from poor U.S. non-farm payroll figures which were well below expectations. These are seen as an indicator of when the U.S. Fed will start to raise interest rates with most observers now seeing June as unlikely – although there’s always the chance that the Fed will make the move then, but at the minimum level of 25 basis points, to test the waters. However some see the latest payroll figures as suggesting a rate rise will now not occur until late in the year, if then. And again, as suggested by metals consultancy Metals Focus in its Gold Focus 2015 report (see: End of bear cycle for gold in 2015 – Metals Focus , even if and when the Fed does make the move, although there may be a knee-jerk downwards reaction in the gold price, this will be shortlived.