Gold Demand within the Chinese Gold Market

Since nearly all gold supply and demand flow through the Shanghai Gold Exchange (SGE), SGE gold withdrawals are a suitable proxy for overall gold demand in China. This demand includes consumer gold demand and institutional demand (in the form of direct investment purchases of gold bullion directly on the SGE).

Controversially, Western precious metals consultancies only report Chinese consumer gold demand, and ignore direct purchases of gold on the SGE. With SGE gold withdrawals for 2016 totalling 1970 tonnes, the Western consultancies are capturing less than half of true Chinese gold demand as represented by the SGE gold withdrawal figures.

Gold held by Chinese commercial banks on their balance sheets is another form of Chinese gold demand that remains largely unappreciated. Although the banks to some extent report that they have gold holdings on their balance sheets, the data is not very transparent so this from of Chinese gold demand remains a topic that is quite opaque.
Continue reading…

Kind Regards,