Perhaps a week later than usual – due to the Golden Week holiday, China’s Shanghai Gold Exchange has just published its gold withdrawal figures for September, and they’ve come in around 12% down on the same month a year ago. The question is does this represent a downturn in Chinese gold demand, despite the relatively low gold price with lower metal prices usually sparking an upturn in retail gold demand in mainland China and Hong Kong? – See table below for monthly SGE gold withdrawals for the past couple of years:
Table: SGE Monthly Gold Withdrawals (Tonnes)
|Month||2018||2017||2016||% change 2017-2018||% change 2016-2018|
|Year to date||1,554.55||1504.70||1406.03||+ 3.3%||+10.6%|
Source: Shanghai Gold Exchange. Lawrieongold.com
* Months include week long New Year and Golden Week holiday periods
A double digit percentage downturn for one month may in reality not be indicative of a downturn – yet – but taken into account with other factors (not least the initial impact of the trade and tariff ‘war’ with the U.S.) we think it may be time to take note given the huge impact of Chinese gold consumption on global gold trade.
It is actually a somewhat contentious point as to whether SGE gold withdrawals are a real representation of Chinese demand. The major gold consultancies dispute this and come up with far lower figures for Chinese consumption, but, in terms of actual gold flows they do seem to be far closer to reality than the consultants’ estimates. Known gold imports from those countries which break down their gold export figures by national destination, plus China’s own gold production, plus an allowance for scrap come far closer to the SGE withdrawal total than the consultants’ consumption estimates. If we add in a small allowance for gold imports not detailed in national statistics we do end up with a sum total which equates to SGE withdrawals. Regardless, though, the SGE figures given they are released monthly, are an easily accessed measure of trends in gold activity in the world’s largest gold consumer.
So we await future months’ SGE figures with particular interest given they will include demand leading up to the next Chinese New Year which falls on February 5th (a year of the pig), around 10 days earlier than the 2018 New Year.
Those with sharper eyes may note that this year’s February SGE gold withdrawal figures were some 20% lower than the previous year without prompting the kind of comment we are seeing here, but this is explainable by the comparative dates of the Chinese New Year, which fell mid-February this year and end-January in 2017 with much more of the corresponding holiday period, when the SGE is closed, falling within February this year.
Suffice it to say that if the latest SGE gold withdrawal figures do presage a turndown in Chinese gold demand, this could have an important impact on global demand fundamentals given that China is the world’s largest gold consumer.