Robust demand at the Shanghai Gold Exchange in week 25 (June 16 – 20), physical gold withdrawn from the vaults accounted for 36.3 metric tonnes, according to the Chinese SGE weekly report published last friday.
In my opinion Chinese (wholesale) demand, that equals SGE withdrawals, is still trending upward (if we ignore the variant demand from April to November 2013 due to the drop in the price of gold). In the chart below there is a clear pattern in SGE withdrawals; around every new year and the Chinese lunar year there is a spike in withdrawals, this is due to Chinese tradition to buy gold as a gift in this period. In between these spikes withdrawals are relatively steady, with the exception of 2013. The trend to watch is the course of the spikes around new year and the interval periods. So yes, demand came down from extraordinary levels in 2013. Is Chinese demand in a downtrend? I wouldn’t say so.
The Chinese calendar differs from the Gregorian we use in the West. The lunar year always starts between January 21 and February 20. This year the lunar year was celebrated at January 31, the year of the horse.
Overview Shanghai Gold Exchange data 2014 week 25
– 36.3 metric tonnes withdrawn in week 25 (16-06-2014/20-6-2014)
– w/w + 9.81 %
– 920 metric tonnes withdrawn year to date.
My research indicates that SGE withdrawals equal Chinese wholesale gold demand. For more information read this. The SGE chairman, Xu Luode, confirmed this correlation last week at the LBMA forum in Singapore. Additionally I called the SGE this morning to have Xu’s statement confirmed. The SGE employee I spoke to said: “Xu noted more than 2000 tonnes was delivered into consumers hands and that could be interpreted as demand.”
This is a screen shot from the weekly Chinese SGE trade report; the second number from the left (blue – 本周交割量) is weekly gold withdrawn from the vaults in Kg, the second number from the right (green – 累计交割量) is the total YTD.