Withdrawals from the Shanghai Gold Exchange (SGE) came in very strong in week 51 at 61 tonnes, year to date the counter has reached 2016 tonnes.
Some SGE data lags one week, some not; in this post all data is up to week 51 (December 19).
Withdrawals from the vaults of the SGE captures Chinese wholesale demand, however, to get a more precise view on demand we have to add SGEI volume to the equation (read this post for a comprehensive explanation on the relationship between SGE withdrawals and volume on the Shanghai International Gold Exchange – SGEI). If we subtract SGEI volume from SGE withdrawals, at least 51 tonnes was withdrawn in week 51, at most 61 tonnes; year to date, at least 1,963 tonnes was withdrawn, at most 2,016 tonnes.
I could speculate on why Chinese wholesale gold demand is likely to be more in the area of the upper limit or bottom limit, fact is I have little evidence to back it up; all I know at this stage is that it’s somewhere in between.
Last week I wrote I expected withdrawals to be strong in the coming weeks, as December and January are seasonally the strongest months, but the Chinese are often aiming to buy their physical on the dips. In week 49 and 50 withdrawals were a bit held back because of the rising price of gold in renminbi. In week 51 the price was declining, so withdrawals were up.
Year to date SGE withdrawals – 1963 tonnes, the bottom limit – were supplied by (my best estimates):
- 442 tonnes mine production
- 1,172 tonnes import
- 349 tonnes recycled gold
If we use the upper limit – 2016 tonnes, import and/or recycled gold had to be more.
SGE premiums have been hovering in between 0.51 and 0.76 % above London spot throughout week 51.
Total SGE (gold) trading volume was down 14 % from the previous week at 410 tonnes. The uptrend is still intact as we can clearly see from the next chart.
On the Shanghai Futures Exchange (SHFE) volume traded in Au futures accounted for 786 tonnes in week 51 (1,196 tonnes SGE + SHFE volume), on the COMEX 2,527 tonnes changed hands.