Another very strong week for Chinese wholesale gold demand, measured by withdrawals from the Shanghai Gold Exchange. In week 45 (November 2 – 7) physical withdrawals from the vaults accounted for 54 tonnes. My basic equation tells me more than 40 tonnes had to be imported to meet this demand. Year to date 1708 tonnes have been withdrawn from the vaults and this number will likely surpass 2,000 tonnes by year end as December and January are seasonally the strongest months.
As we can see in the chart above, the Chinese are quite eager to buy gold on the dips. SGE premiums were again pushed upwards last week by the new lows in the price of gold. The inverse relation is demonstrated in the next chart.
I would like to share a thought: The SGE premium chart illustrates the largest physical gold buyer on the planet has an increasing interest in buying gold, rising premiums, over the interest of the seller when prices decline. What we’re seeing is increasing demand from the largest physical buyer and falling prices concurrently. I wonder if this would be possible without a paper market.
This post was published at Bullion Star on 17 Nov 2014.
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