Chinese gold demand picking up - 183.2 tonnes in March

(April 12, 2016 - Sharps Pixley)

The latest monthly figure for gold withdrawals from the Shanghai Gold Exchange (SGE) looks to be beginning to pick up after a particularly poor February when figures will have been affected by the Chinese Lunar New Year week long holiday when the Exchange was closed. At 183.2 tonnes the total will disappoint some, but comparing the figure previous monthly totals it looks like Chinese domestic demand, as represented by movements out of the SGE, is getting back on track. For the full quarter though, the figure remains down on that of a year earlier at 515.9 tonnes this year as against 625.1 tonnes in 2015, a fall of 17.5%. The quarterly total is down on 2014 too when 2,102.4 tonnes was the full year total, but comfortably above the 2013 level, which ended up as a then record year for SGE withdrawals (2,197 tonnes) until the figure was surpassed in 2015 (2,596.4 tonnes).

So from a gold bull’s point of view the March figure could be seen as promising rather than exciting. There can be big fluctuations in Chinese demand from month to month so it is early days yet. It will be interesting to see what effect the higher gold price will have on demand, assuming the better levels are maintained. The Chinese are believed to be fairly price sensitive in terms of gold purchases, and the economy is no longer growing at the rate of prior years. The country’s stock market has been volatile to say the least and the country’s main stock exchange index is hugely below last year’s peak (down 41%), although the peak, reached in early June last year was at something of bubble proportions. Compared with a year ago, when the markets were already well into a very heady rise, the SSE Composite index is down around 25% and is currently at a level  where it was in December 2014. Whether this has prompted greater investment in gold as a safe haven or not remains a matter for some discussion.

What is apparent from the latest monthly and quarterly figures is that SGE withdrawals are probably headed back to the 2,000 tonne plus level for the full year. Levels do tend to fall off in the Summer months but pick up again in the Fall and again towards the year end as the next Chinese New Year approaches. In 2017 the Chinese New Year falls on January 28^th, rather earlier than in 2016 when it was on February 8th.