For those avid watchers of the Shanghai Gold Exchange (SGE) withdrawal figures, those for the month of March came in at a respectable 183.2 tonnes – well above the rather abject February level (107.6 tonnes) which was kept down by the SGE’s closure over the Chinese Lunar New Year holiday, but well below that for January which saw a bit of a buying surge ahead of that holiday. With Q1 gold withdrawal figures always affected by the timing of the New Year holiday period, which fell on February 6th this year, it is always difficult to draw any sensible conclusions as to what these early year figures mean in terms of likely total Chinese demand for the full year.
Looking at the total Q1 figure, this came in at 515.9 tonnes – 17.5% down on that for the Q1 figure for last year when the full year total was a massive 2,596.4 tonnes, but it is a respectable figure nonetheless suggesting a full year total of over 2,000 tonnes for the fourth year in a row.
A big unknown here of course is how much the considerably lower growth in the Chinese economy, coupled with higher gold prices should they continue, or indeed rise further, will do for Chinese gold demand. The Chinese are believed to be bargain hunters in terms of the gold price, climbing in when they perceive it to be weak – as witness the huge surge in demand in April 2013 when the gold price was knocked back very sharply indeed in the West, leading to what was then a big new record year for Chinese gold demand – since surpassed in 2015.
The performance of the Chinese stock markets will also be relevant – but whether the big fall from its peak last year (down over 40%) will encourage safe haven gold investment, or restrict demand because of loss of capital, is something of an unknown. However fear of a possible gradual devaluation of the yuan against the US dollar as the country defends its export earnings, could well see a boost to gold demand. We shall see.
For more analysis on the latest SGE figures click on Chinese gold demand picking up – 183.2 tonnes in March on sharpspixley.com