The Shanghai Gold Exchange (SGE) has now released its final report for the year on monthly gold withdrawals, with the December figure falling back below 200 tonnes (in comparison withdrawals totalled just short of 215 tonnes in November). This brings the total for the year to 1,970.37 tonnes, the first time the figure has been below 2,000 tonnes since 2012, and a fall of 24.1% on last year’s record total of 2,596.37 tonnes.
There are, and no doubt always will be, some arguments among analysts as to whether SGE gold withdrawals are an accurate representation of total mainland China gold demand. Some – notably Koos Jansen of http://www.bullionstar.com, who perhaps follows the Chinese gold sector closer than anyone — avers that they are and supports his argument with pointers to Chinese official statistics which would seem to support his analysis. Meanwhile the big precious metals focused consultancies – Metals Focus (which also supplies the data put out by the World Gold Council), GFMS and CPM Group classify consumption in much narrower terms and come up with various – and often differing – reasons why SGE withdrawals should not be equated to total Chinese gold demand. What puzzles us with regard to the figures put forward by the latter organisations is that their demand estimates always seem to fall hugely short of known Chinese gold import figures as published in official data from principal conduits Hong Kong, Switzerland, the U.K. and Australia, and not including possible gold imports from other gold producing nations which do not publish the breakdown of their gold exports in country-by-country detail. At one time one could point to Hong Kong exports to the mainland alone as a proxy for total mainland gold imports, but that’s no longer the case as 40% or more now looks to be going into the mainland directly, bypassing Hong Kong altogether.
But whatever one’s views on the accuracy of SGE gold withdrawal figures as a true representation of Chinese gold demand, they obviously at the very least demonstrate the overall trend and this shows that total Chinese gold demand slipped sharply in 2016 compared with the years immediately preceding – but it still remains very substantial keeping China at the head of the list of global gold imports. It is also the world’s top gold producer, with annual new mined gold production nearly 70% higher than that of No. 2 miner, Australia – or it could now be Russia in second place, we won’t know until the latest global gold production totals are available. For the last year for which final figures are available – 2015 – China produced some 460 tonnes of gold, Australia 274 tonnes and Russia 269 tonnes.
What the SGE withdrawals figure for the year does confirm though, is that however one calculates Chinese gold demand it has very definitely slipped sharply in the past year – but if we do equate the SGE total to the total Chinese gold off-take, China still takes in over 60% of global new mined gold output on it own – and, as Koos Jansen points out in his most recent article on bullionstar.com — How The West Has Been Selling Gold Into A Black Hole, what goes into China doesn’t come out again.
This post was published at Sharps Pixley
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