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What Is China’s Real Gold Consumption And Where Is It Headed?

April 13, 2015

There is considerable dissension in the analytical sector over what actually constitutes China’s real gold demand. On the one hand we have what the mainstream analysts record as Chinese consumption, which comes in at somewhere between 800 and 900 tonnes last year. On the other hand we have withdrawals from the Shanghai Gold Exchange (SGE) which totalled just over 2,100 tonnes in 2014, which some, notably China gold watcher Koos Jansen and Australian chart king, Nick Laird, feel is the real figure. There is thus an enormous discrepancy in the perceived data, which is, in part due to differing interpretations of what consumption is (GFMS and Metals Focus both use a somewhat limited view of what goes into the ‘consumption’ calculation, while CPM Group insists there is a substantial degree of double, or even triple or more, counting of recycled gold in the SGE figure, but without really quantifying how much is actually involved.)

As an indicator of gold flows into China, all the data has value in indicating trends, but what the various interpretations seem to show is that Chinese wholesale demand (i.e. demand by the general public comprising primarily jewellery and investment (bars and coins) and other gold investment products did indeed slip sharply in 2014 over 2013’s record levels- perhaps by as much as 30%. But the SGE figures also suggest that overall Chinese demand (which includes gold going into Chinese bank vaults for use in financial transactions – which falls outside the mainstream analysts’ ‘consumption’ calculations) did not fall back by nearly as much – perhaps by only 4%. This could be seen as indicating the banking sector perhaps accounted for close to 1,000 tonnes in 2014 – which seems an awful lot and still leaves a serious statistical discrepancy.

What is apparent from the latest set of mainstream analysts’ ‘consumption’ statistics – even though they are hugely below the SGE overall figures – is that China remained the world’s No. 1 gold consumer last year, comfortably ahead of India. Unfortunately the World Gold Council’s earlier figures, suggesting China had fallen behind India, will continue to be quoted by mainstream media as definitive – unless, and until, perhaps the WGC adjusts its data in the light of the latest GFMS figures, when the next Gold Demand Trends report comes out next month. Of coursed if one adds in the presumed bank demand, China will have remained hugely ahead of India.

To an extent the higher figures are confirmed by China’s known gold imports plus domestic production. Gold imports via Hong Kong totalled 750 tonnes in 2014 and that through other ports of entry are known to have increased substantially to perhaps as much as 300 tonnes – figures not gleaned from Chinese import statistics, which are not published, but as with the Hong Kong figures come from exporting nations’ net gold trade data.

Together with Chinese domestic gold production this all came to around 1,500 tonnes last year. This is still a long way short of SGE total withdrawals and some of the gap will have come from recycled gold. But even so it still represents a huge gold absorption within China, far in advance of the mainstream analysts’ figures for China’s gold ‘consumption’.  But as we pointed out above much of this discrepancy boils down to what the analysts actually include in their ‘consumption’ figures.

So what of the current year. As we’ve pointed out in an earlier article (China gold flows to hit Q1 record

China’s Q1 SGE withdrawals are already running well ahead of last year’s then record figures – by more than 10% year on year. The Q1 SGE withdrawals total was around 623 tonnes – around 10.5% up on those for Q1 2014 – the previous Q1 record. Whether one accepts these as defining Chinese consumption figures or not, the trend increase suggests that China demand remains very firm at the very least.

Now India has also just reported strong March gold imports too of 125 tonnes as gold trade increased ahead of the Akshaya Tritya festival – but also presumably because now the Indian February budget did not see a relaxation in import duties, and pent-up demand from those that had been delaying purchases in anticipation of a duty fall, added to the overall March figure. Overall gold imports for the financial year ended March 31 were reported as being 900 tonnes. Add in gold smuggled in to avoid the import duties and the real figure was probably comfortably over 1,000 tonnes.

So with the world’s top two gold consumers – measured by whoever’s statistics one utilises (See the table of the world’s top gold consumers from GFMS – Top 20 gold consumers: China still No. 1 – GFMS – continuing to absorb gold at a very high rate, and with both these enormously populous, and gold hungry, nations continuing to see their wealth rising along with the growth in their middle classes, continuing strength in global gold demand looks assured.

And again with 11 of the top 20 gold consumers in the table located in Asia and Asia Minor, the flow of physical gold eastwards continues at an extremely high rate.  In the longer term this has to have a hugely positive impact on the gold price – or so we would imagine!


Courtesy of

Lawrence (Lawrie) Williams has been involved with both the technical and the financial end of the mining sector for over 40 years, formerly CEO of top mining industry business publisher, Mining Journal Limited, he was Mineweb's General Manager and Editorial Director up until October 2012 and is now Consultant Editor. He has worked as a mining engineer on gold, platinum, uranium and copper mining operations.

In 1792 the U.S. Congress adopted a bimetallic standard (gold and silver) for the new nation's currency - with gold valued at $19.30 per troy ounce
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