The world is changing fast and to keep up you need local knowledge with global context.
by Lawrie Williams
With recorded deliveries of just under 60 tonnes in the final week of August, the Shanghai Gold Exchange statistics would seem to disprove general media reports that Chinese gold demand is falling. The week 34 figures (up to August 28th) bring SGE withdrawals for the month to a staggering 254 tonnes (with one trading day to go). This is already a huge new monthly record and what is even more significant is that August is usually one of the weaker months of the year for SGE deliveries. To put this figure into context, the world’s second largest gold producer, Australia, mined 272 tonnes of gold last year, so the SGE delivered nearly as much as this total out of the exchange in a single month. And don’t forget the SGE only deals in physical gold – there’s no paper gold element involved.
The charts below show the pattern extremely well. The top chart shows cumulative deliveries out of the SGE and a month by month bar chart covering the past seven years and shows just how strong Chinese demand as expressed by SGE withdrawals has been over the past three years in particular. This year looks to be heading comfortably for a new annual record.
The lower of the main charts shows the total monthly SGE withdrawals figures so far this year with deliveries at the same time in previous years showing the acceleration this year.
So, year to date SGE figures show that physical gold withdrawals out of the Exchange are already running hugely ahead of those at the same time of year even in the record 2013 year for Chinese gold demand. Indeed withdrawals are running fully 219 tonnes higher than by the end of August 2013. With Chinese demand usually stronger in the tail end of the calendar year, particularly in November and December as the Chinese New Year – a time when domestic gold consumption normally is at its highest – approaches, it does currently look as if we will see a huge new record in the SGE figures this year.
This just doesn’t seem to correlate with the general position on Chinese gold consumption as expressed by the media which continually tells us that demand is weaker this year than last and well below that of the record 2013 year. While some aspects of Chinese consumption may be running lower, the SGE figures tell us that total gold flows within China are the strongest ever.