Gold demand still running high, so where’s the turning point?
Chinese gold demand as recorded by the SGE hit 227 tonnes in October while Indian buying also strong for wedding season.
Posted: Monday , 10 Nov 2014
GOA (MINEWEB) -
As can be seen from Nick Laird’s (www.sharelynx.com) excellent ongoing chart of gold withdrawals from the Shanghai Gold Exchange (SGE), a further 47.5 tonnes were withdrawn during the week ended October 31. Thus the total figure for October comes to a fraction over 227 tonnes – a monthly figure which would suggest an annual withdrawal rate of some 2,724 tonnes – or close to global new mined supply.
However, as also seen from the chart, demand obviously dropped sharply from March through July, although it had started the year at an even higher level. Overall monthly demand to date suggests total annual consumption this year of around 2,000 tonnes, around 10% down on last year’s total, although if October levels persist the year’s total figure could be a little higher. 2014 demand will definitely be well in excess of that for 2012 and years previous though.
The latest gold export figures to the Chinese mainland from Hong Kong are also in now with a net figure of 68.6 tonnes (figures from Nick Laird again) confirming the ongoing wide disparity between Chinese imports via this route and the overall SGE October figure. This latter suggests total imports of around 160-170 tonnes in the month taking into account estimated internal supplies from scrap and mine production, between them probably accounting for around 55-65 tonnes.
Quelle: mineweb.com, sharelynx.com
As we have pointed out here before, Hong Kong gold exports to the mainland used to be far closer to overall import levels, but since March of this year this appears no longer to have been the case with the gap widening as new import routes for gold – notably via Beijing and Shanghai – appear to have taken over as the principal channels for gold coming into the mainland. Yet still some western media seems to equate Hong Kong exports with total Chinese demand, which seems misleading to say the least.
The data provided by analysts who follow the SGE in detail in terms of both withdrawal figures and price premiums over the LBMA prices – notably Nick Laird of sharelynx.com and Koos Jansen of bullionstar.com - thus would appear to provide a far better picture of what is really happening with Chinese gold demand. As Jansen has pointed out categorically in the past, SGE withdrawal figures do equate precisely to overall Chinese gold demand, although ignoring anything the country’s central bank may be doing in terms of building reserves, which could be adding substantially to the overall figures.
Meanwhile Mumbai’s Business Times reported heavy Indian buying as the price fell earlier in the week. Buyers were, according to the newspaper, convinced of a further price rebound and were thronging the bazaars to tie down gold purchases. A rebound came in in later trading on Friday which saw gold pick up around $30-40 from earlier lows, but even so Indian buying as the wedding season gets under way was still reported as being particularly strong on Saturday.
Additional stimulus from two of the biggest non-U.S. sections of the global economy – the EU and Japan – appeared to have no effect on the mid week price falls, but further consideration by the global investment community may also have played a part in gold’s late recovery along with some unexpectedly poor U.S. employment statistics, as may reports of Russian forces again entering Ukraine as government forces there were reported as shelling pro-Russian elements in Donetsk despite a supposed ceasefire. One wonders how much control the Ukraine government actually has over its army and supporting far right wing militias.
While the U.S. Fed may be cutting back on monetary stimulus, other significant sectors of the global economy seem to be embracing it, while serious geopolitical issues seem reluctant to peter out. Russia seems as if it may still be testing out Western response to further moves in Ukraine and given the reluctance of many European countries to ratchet up sanctions on Russia – indeed there are moves afoot to cut them back – President Putin may well hold the trump cards in any West/Russia standoff.
It appears that the only seeming certainties out there are that some major financial interests and short position holders in gold are keen to keep the price suppressed through dumping big levels of gold futures on the markets to drive the price downwards at weak trading hours. But the end game, if these moves are purely financial, will be to stock up on physical gold and then turn the gold market sharply positive again thus making mega profits on the gold offloaded by tired gold investors. And if this is the case, once gold starts a serious upwards move it could just keep on going. The question is: Are we nearly there yet? – as my children would ask repetitively on long car journeys. Maybe we are. We shall soon see..
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