While gold prices continue to languish in the doldrums and are on course for their worst month since 2013, global demand and especially Chinese retail, investor and official demand continues to remain very robust. Indeed, China looks likely to see a new record demand for gold annually again in 2015.
Shanghai Gold Exchange (SGE) deliveries as reported last Friday were again very robust with another 54.063 tonnes of bullion deliveries for the week ending November 20th. Shanghai Gold Exchange (SGE) deliveries remain the best indicator or proxy for actual Chinese demand and appear to show Chinese gold demand is heading for a new record in 2015 (see charts below).
China added another 14 tonnes or 450,000 troy ounces of gold bullion to its foreign exchange reserves in October.
Gold reserves rose to 1,722.5 metric tonnes or 55.38 million troy ounces at the end of October. This was up from 54.93 million at the end of September, data from the People’s Bank of China (PBOC) showed today.
China’s increasingly powerful central bank has been adding between 14 tonnes and 19 tonnes of gold every month. The strong demand and positive view of gold comes as the country looks to diversify its massive foreign exchange reserves of over $3.5 trillion.
China’s diversification into gold was again healthy and robust in ounce or weight terms but remains small in dollars terms at just $477 million at today’s prices – 0.00136% of fx reserves or 1.6% of fx reserves on an annualised basis.
China’s sharp devaluation of the yuan this summer sparked another gold bar and coin “buying spree” in China according to the World Gold Council in their recent Gold Demand Trends report. Prudent Chinese store of wealth buyers are again protecting their wealth from volatility and sharp falls in stock markets and indeed in some property markets.
Contrary to the widely held belief that gold bullion demand is subdued, it is actually very robust and, indeed, surging in key markets such as China. Data shows that surging demand for coins and bars and a rise in buying by central banks pushed physical gold demand up 7% in the third quarter. Demand for gold coins and bars jumped by 26% year-on-year in the last quarter, GFMS analysts at Thomson Reuters reported in the Q3 update of their Gold Survey 2015.
Retail investment surged in top buyers China, India and Germany – rising 26 percent, 30 percent and 19 percent respectively. Those three markets alone accounted for an additional 26 tonnes of bullion buying.
This data was confirmed by the World Gold Council. Their data shows global investment demand saw a significant rise of 27% to 230 tonnes, up from 181 t