LAWRIE WILLIAMS: Chinese gold demand way up in April

LAWRIE WILLIAMS: Chinese gold demand way up in April from Sharps Pixley

Despite the latest analysis from the World Gold Council (WGC) which suggested a poorish start to the year for gold demand (See:  Q1 gold demand lowest for 10 years), Chinese demand as represented by gold withdrawals out of the Shanghai Gold Exchange (SGE) appear to have picked up well in April coming out at 28% higher than in 2017 and 24% higher than in 2016 (see table below).  They are still around 9% down on the record 2015 figure for the first four months of the year, but at least the trend appears positive when some other demand statistics appear to be slipping.

Indeed April 2018 gold withdrawals were comfortably higher than those in April 2015 too, but in the latter year gold withdrawals out of the SGE were particularly strong in the second half of the year and totalled almost 2,600 tonnes for the full year – around 80% of total global new mined production.  We don’t expect this figure to be matched in the current year, but the Chinese figures look to be off to a good start.

Table: SGE Monthly Gold Withdrawals (Tonnes)

Month   2018 2017 2016 % change 2017-2018 % change 2016-2018
January   223.58 184.41 225.08 +21.2%  -0.7%
February*   118.42 148.24 107.60 -20.1% +10.7%
March  192.61  192.25 183.24  +0.2%  +5.1%
April  212.65  165.78 171.40  +28.3% +24.07%
May  138.08 147.28
June  155.51 138.51
July  144.71 117.58
August  161.41 144.44
September  214.24 170.90
October  151.54  153.25
November  189.10  214.72
December  185.21  196.37
Year to date   749.07 690.68 687.32 +  8.45% +8.98%
Full Year  2,030.48  1,970.37

Source: Shanghai Gold Exchange.  Lawrieongold.com 

Of course, as we have pointed out here previously it is a contentious issue as to whether SGE withdrawal figures are an accurate indicator of total Chinese gold demand.  The mjor precious metals consultancies come up with all kinds of differing reasons why this is not the case.  But in support of our views on this we should point out that SGE withdrawal figures seem to relate far better to the sum of China’s own gold production plus known gold imports, plus a reasonable figure for scrap supply than these same consultancies’ estimates of Chinese annual gold demand.

The latest SGE figures do suggest that investment demand for gold bars and coins may be picking up – particularly as the gold price will have appeared weak at times.  The prospects of a trade tariff war developing with the USA may also be driving people to safe haven investment and the huge falls in the value of cryptocurrencies will also have diminished interest in these as a safe investment asset which again may have turned the gold-loving Chinese back to the yellow metal.  The WGC Q1 report noted above does suggest that gold jewellery demand in China as picking up too and points to a continuing sharp growth in technological demand – and China is at the forefront of the latter.

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Lawrence Williams

Lawrence (Lawrie) Williams is a well known London-based writer and commentator on financial and political subjects, but specialising in precious metals news and commentary. He is a qualified and experienced mining engineer having graduated in mining engineering from The Royal School of Mines, a constituent college of Imperial College, London – recently described as the World’s No. 2 University (after MIT). He has worked in mines in South Africa (gold, uranium and platinum), Canada (uranium), Zambia (copper) and U.K (coal) and holds a South African Mine Managers certificate. He also worked as a gold mining company analyst for one of the major South African mining houses. He left South Africa to join Mining Journal as Financial Editor and worked his way through that organisation to edit Mining Magazine, and then join the Board. He was Managing Director (CEO) of the company for 13 years up until it was sold in 2001. During part of this period he was also President of Nevada-based U.S. company Mining Media Inc which was publisher of North American Mining magazine.