LAWRIE WILLIAMS: Chinese 2019
gold demand still slipping but don't panic
13
August 2019
Perhaps
the U.S.-instigated trade war is beginning to bite with the Chinese consumer.
As readers of sharpspixley.com will be aware, we measure Chinese gold demand
China is still the world's largest gold consumer) by the reported gold
withdrawal figures from the Shanghai Gold Exchange (SGE). This is a consistent
measure reported monthly by the SGE, so does provide comparative figures direct
from source rather than estimates of consumption from the major precious metals
consultancies, which seem to hugely underestimate known gold flows (published
gold import figures from major sources) into the Middle Kingdom plus the
nation’s own production. The latest monthly figures for the past three years
are set out in the table below and suggest that Chinese gold demand this year
will be substantially less than iun the past couple of years – but perhaps more
importantly the projected annual total will be the lowest for five years, as we
reported just over a month ago on the releas of the June withdrawal figures by
the SGE.
Table: SGE Monthly
Gold Withdrawals 2017-2019 (Tonnes)
Month
|
2019
|
2018
|
2017
|
% change
2018-2019
|
% change
2017-2019
|
January
|
218.54
|
223.58
|
184.41
|
-2.30%
|
18.51%
|
February*
|
99.77
|
118.42
|
148.24
|
-15.75%
|
-32.70%
|
March
|
218.03
|
192.61
|
192.25
|
+13.19%
|
+13.41%
|
April
|
151.89
|
212.64
|
165.78
|
-28.57%
|
-8.38%
|
May
|
123.11
|
150.58
|
138.08
|
-18.24%
|
-10.84%
|
June
|
107.45
|
140.59
|
155.51
|
-23.57%
|
-30.87%
|
July
|
129.33
|
137.41
|
144.71
|
-5.88%
|
- 10.63%
|
August
|
|
190.59
|
161.41
|
|
|
September
|
|
188.12
|
214.24
|
|
|
October*
|
|
142.94
|
151.54
|
|
|
November
|
|
179.08
|
189.1
|
|
|
December
|
|
178.04
|
185.21
|
|
|
Year to date
|
1048.12
|
1175.83
|
1128.82
|
-10.86%
|
-7.15%
|
Full Year
|
|
2,054.54
|
2,030.48
|
|
|
Source: Shanghai Gold Exchange.
Lawrieongold.com
On
the basis of the year to date figures, full year Chinese gold demand, as
measured by SGE withdrawals, may struggle to reach 1,800 tonnes as compared
with over 2,000 tonnes in 2017 and 2018 – and in particular with the record
annual figure in 2015 where full year withdrawals totalled around 2,600
tonnes. We speculated a month ago that the assessed drop in Chinese gold
demand, coupled with an apparent continuing downturn in the annual Chinese
growth percentage might be expected to be a positive factor in the ongoing
trade discussions between the U.S. and China but it seems there has been little
progress here – indeed trade tensions appear to have escalated with President
Trump apparently imposing tariffs on another $3 billion worth of Chinese
imports, while the Chinese have apparently allowed the yuan’s currency parity
with the dollar to slip further to over 7 – an apparent U.S. ‘line in the
sand’. While the tariff impositions may well be beginning to hurt the Chinese
economy, it is also adversely impacting that of the U.S. with higher prices for
U.S. manufactured goods which rely on imported Chinese components becoming more
expensive. The 5.5% fall in the dollar/yuan parity since April will also be
mitigating the effects of the Trump-imposed tariffs.
Despite
the apparent disadvantage to China represented by the big trade imbalance in
China’s favour, which theoretically should give the U.S. a ‘trade war’
advantage, President Trump is a businessman who believes that financial
advantage is the be-all and end-all in monetary trade disputes. But China is
basically a Communist-led nation where economic advantage may well take second
place to a long-term global growth plan. It is also an Asian nation where
‘saving face’ may take priority over a purely monetary agenda. Trade disputes
thus are not necessarily subject to like with like agendas and President Trump
may well have substantially over-estimated the likelihood of China capitulating
to his demands, whatever the economic consequences.
However,
as we have pointed out beforehand in this column, although a fall-off in
Chinese demand might represent a negative for gold’s supply/demand balance, it
is being offset by a pickup in demand elsewhere in the world, increasing gold
accumulations by Central Banks and inflows of gold into the world’s gold ETFs
suggesting a return of institutional gold demand into the asset class. This
has shown up in a big surge in the gold price over the past few weeks. It may
not have been allowed to end the week above the psychological $1,500 level by
those who wish to control the price, but higher futures prices suggest that the
$1,500 barrier may be breached permanently in the weeks – or even days –
ahead. General equities may have reached record highs, but markets seem to be
increasingly nervous which bodes well for increasing safe haven uptake. These
are indeed interesting times in the markets. We wait with bated breath to see
how it will all pan out!
Source:
https://www.sharpspixley.com