Still Firing on all Cylinders: China’s Physical Gold Market

By Ronan Manly

While headlines may be on the Sino-US trade war, China’s gold market continues to fire on all cylinders, with physical gold continuing to flow into, and through, the world’s largest gold hub.

Year-to-date, Chinese wholesale gold demand is on a par with recent years, Chinese central bank gold purchases have officially recommenced after a two year halt, and gold import data into China is now more transparent than ever before.

Shanghai Gold Exchange (SGE) Withdrawals

In China, the critical trading hub for the Chinese gold market is the Shanghai Gold Exchange (SGE). Practically all physical gold supply flows through the SGE, and on the flip side, nearly all Chinese physical gold demand is met by physical gold withdrawals from the SGE’s nationwide storage vaults. Therefore, physical gold withdrawals from the Shanghai Gold Exchange is the best proxy available for Chinese wholesale gold demand.

Based on this proxy, Chinese gold demand this year is as strong as ever.  In April, 152 tonnes of gold were withdrawn from the SGE gold vaults.

Shanghai Gold Exchange (SGE) Monthly physical gold withdrawals 2008 – April 2019. Chart source:

For the year-to-date from January through to April (month 4 in the chart below), 688 tonnes of gold have now been withdrawn from the SGE’s vaults. which is on a par with the same time period in other recent years, i.e. 2017, 2016, 2014 and 2013.

SGE Gold Withdrawals: January – April 2019 compared to same timeframe in previous years. Source:

Annualising the latest January to April data also points to a huge 2064 tonnes of gold being withdrawn from the SGE gold vaults in 2019, which is on a par with actual SGE gold withdrawals in both 2018 and 2017, years in which wholesale gold demand in China reached 2055 tonnes and 2030 tonnes, respectively.  See chart below.

Therefore 2019 is shaping up to be another very strong year for Chinese gold demand as physical gold continues to move from West to East.

SGE Gold Withdrawals annualised, 2008 – 2019

Pole Position in global Gold Mining

Although China is the world’s largest gold producer, it still needs to meet its voracious appetite for physical gold by importing most of the gold that flows into and out of the Shanghai Gold Exchange. That is of course, apart from gold scrap / recycling output, and reverse flows of investment demand (disinvestment). But for the most part, China meets its gold demand by importing huge quantities of gold bars from all over the world. So whatever gold it doesn’t produce domestically, China imports.

Latest figures for Chinese gold mining output for the year 2018 were released by the China Gold Association (CGA) in January. According to the CGA, China produced 401.12 tonnes of gold in 2018, making it the world’s top gold producer, a pole position it has held now for the last twelve years.

Of this 401 tonnes, 346 tonnes, or 86% of the total, came from domestic gold mining, with 55 tonnes from gold extracted from domestic base metal processing. Beyond this headline figure, China also has some other gold supply, which people tend to forget. The CGA sometimes calls this ‘gold imports’, but it also officially describes it as ‘foreign imported raw materials which produced gold’. In 2018, this imported material that produced gold totaled 112.78 tonnes. Therefore China’s overall gold supply before ‘gold bar’ imports are added, was 513.9 tonnes in 2018.

Its also important to remember that China claims to have another 13,000 tonnes of gold underground that has yet to be mined. This is according to the World Gold Council, which states that:

“China’s reserves of unmined gold are deep and growing. By the end of 2017, the country had identified gold resources and reserves of 13,195.60 tonnes.”

Gold Imports – Lifting the Veil

Having recorded 2055 tonnes of SGE gold withdrawals in 2018 – i.e. roughly the same as Chinese wholesale gold demand in 2018 – China has to make up the shortfall beyond domestic gold production by importing vast quantities of gold bars, literally in the 1500 tonnes range.

Previously there was some guesswork in how much gold China imported due to the fact that China’s customs authority did not publish this data. This meant that estimates of China’s gold imports had to be derived by piecing together other countries’ gold export data to China, such as gold exports from Switzerland, Hong Kong, the UK and Australia to China.

While that indirect or mirroring method was quite accurate, it didn’t tell the full story.  So it was revealing to see that China has recently begun publishing gold import data in its official trade statistics, an interesting summary of which has been put together by Matt Turner of Macquarie and can be read here.  Notably, this new customs data also includes Chinese gold import figures for 2017 and 2018.

For 2017, China imported a massive 1270 tonnes of gold, while in 2018 it imported an even larger 1506 tonnes of gold (which is more than half of rest of the world’s global annual gold mining output). The new gold import data also interestingly shows the original source countries of the gold bars that China has been importing, not merely the countries that the gold bars last arrived from, such as from Hong Kong. So now we know officially that a lot more gold goes into China from countries such as South Africa and Australia than could previously be fathomed.

In 2018, China imported over 650 tonnes of gold from Switzerland, about 250 tonnes from Australia, 200 tonnes from South Africa, over 100 tonnes from Canada, and nearly 100 tonnes from the US. Other notable import sources included Singapore and Hong Kong. See chart below from Turner’s article.

Official gold imports into China by origin country, 2018. Source:Matt Turner, Macquarie

PBoC Gold Reserves – From one side of the Vault to the Other?

But its not only the private sector which imports gold bars into China. China’s central bank, the Peoples Bank of China (PBoC), imports gold bars too. However, in the case of the PBoC, like all central banks, the gold that it imports is classified as monetary gold, and is exempt from cross border trade statistics.

Read the remainder of the article at