The latest announcement of gold withdrawals out of the Shanghai Gold Exchange, show something of a declining pattern month on month this year – and in cumulative terms are sharply down (25%) on the record 2015 withdrawal figures, but pretty much still on par with 2014.

SGE withdrawals are one measure of total Chinese gold demand – but are seemingly discounted as such by the principal Western precious metals research consultancies which seem to categorise Chinese consumption using some quite rigorous parameters which some feel hugely understate actual gold flows into the Chinese mainland.  The consultancies’ figures even come in comfortably below known Chinese gold imports from countries which report these, and certainly take no account of additional supply from Chinese domestic gold production – currently around 450 tonnes a year.  It seems that flows into the Chinese commercial banking system for use as collateral and in other financial transactions, which are by all accounts quite considerable are ignored in the consultancies’ ‘consumption’ analysis.

Interestingly, the Chinese central bank, The People’s Bank of China (PBoC), equates SGE withdrawals with total Chinese gold demand, while the consultancies maintain there is a degree of double counting in the SGE figures.  But, whatever the truth of the matter, movements out of the SGE, looked at month on month and year on year, are certainly an acceptable indicator as to how overall Chinese demand is faring.

Shanghai Gold Exchange Monthly Gold Withdrawals (Tonnes)

Source: Shanghai Gold Exchange

*February withdrawals figures tend to be anomalously low due to SGE closure during the Chinese New Year holiday

As can be seen from the above table, last year’s record withdrawal figures were hugely boosted   by some very high monthly figures between July and the end of the year.  Past SGE withdrawals have tended to come in higher in the second half of the year, so subsequent monthly figures will be watched with interest to see if this kind of pattern continues in the current year, or whether Chinese demand remains depressed.  But it’s hugely unlikely that this year’s total will come anywhere near that of last year’s record.