by Lawrence Williams
The latest figures for net gold exports from Hong Kong into China confirm the latter nation’s strong demand in the run up to the Chinese New Year holiday. The figure for January was 76 tonnes, up from 71 tonnes in December, but it should be realised that this Hong Kong figure relates specifically to Chinese gold imports – not total demand – and then only to a diminishing proportion of the Asian dragon’s total gold imports. If one views known export levels from the U.S. and Switzerland, where official statistics differentiate between gold going to Hong Kong and to mainland China direct, then the percentage moving in via Hong Kong is perhaps only 60% of total Chinese gold imports – still significant, but well below earlier years when Hong Kong will have accounted for perhaps 90% or more of total Chinese gold imports and was thus used as a proxy by Western analysts for the total figure – a pattern which continues today in much mainstream media coverage of Chinese gold import figures. Last year China relaxed import controls to allow far more direct shipments via other ports of entry – notably Shanghai and Beijing which has reduced the amounts routed through Hong Kong.
If we assume 40% of Chinese gold imports are now going direct to the mainland rather than via Hong Kong, then China’s total gold imports in January will have been a little over 100 tonnes – perhaps still a low figure in relation to mainland China’s assumed total gold consumption in January of just over 250 tonnes according to Shanghai Gold Exchange withdrawal figures. But the Hong Kong export figures tend to lag those of the SGE and February net exports are expected to be high also, whereas SGE figures will undoubtedly be lower given the Exchange’s closure for a week for the New Year holiday. Given increasing gold price premiums in Shanghai since the New Year holiday’s end there is at least some evidence that Chinese demand has resumed strongly. This also appears to have lent some support to the global price of gold, which had faltered a little while the Chinese exchange was closed.
This still leaves a huge disparity between presumed gold imports into the mainland and the SGE figures. Some of the difference – perhaps a maximum of 40 tonnes – will be down to China’s own new mined supply. A certain amount will also have come from scrap and gold refined as a byproduct of imported concentrates. But the likely main balance will have come from stocks built up by jewellery manufacturers and Chinese banks ahead of the New Year holiday. The World Gold Council for example had postulated, in its latest Gold Demand trends publication, that a high proportion of SGE gold withdrawals is not actually ‘consumer demand’ as they assess it, but is being accumulated by the Chinese banks to be used in financial transactions and as collateral.
But some of this could have been being held as bullion stock which could be released to meet the high pre-New Year demand levels.
Lawrence Williams is a former CEO of top mining industry business publisher, Mining Journal Limited, up until its takeover by Mining Communications Ltd. (MCL) in 2003 and was CEO/General Manager/Editorial Director of Mineweb from 2006 up until taking partial retirement, but continues to write for the site.