Shanghai Gold Withdrawals at Record on Signs of More Demand

Shanghai (Sept 30)  Investors have withdrawn a record amount of gold from the Shanghai Gold Exchange this year, adding to signs that demand in China is recovering after a stock market rout and a shock devaluation of the yuan.

Withdrawals jumped 37 percent to 1,891.9 metric tons through Sept. 18 from 1,380.9 tons a year earlier, according to data on the bourse website. Trading increased 150 percent in the first eight months, said Liu Liang, a spokesman for the exchange, the world’s largest spot bullion market.

Global gold prices have slumped about 40 percent from a record in 2011 to the lowest levels in more than five years, spurring an increase in demand from China to India, the world’s top consumers. Purchases in India may jump as much as 15 percent in the final quarter to the highest since 2012. China’s net imports from Hong Kong more than doubled in August from a year earlier and Swiss exports to mainland China rose 49 percent from the previous month.

The increase in withdrawals and trading “reflects a steady increase in Chinese gold demand,” Liu said by phone from Shanghai. The start of operations in the Free Trade Zone and a new wholesale trading platform also boosted liquidity, he said.

China and India are expected to consume 900 tons to 1,000 tons each in 2015, according to World Gold Council estimates in August. China has been increasing its official gold reserves, reporting a further 1 percent rise to about 1,694 tons on Wednesday, the world’s fifth biggest hoard.

Swiss exports of gold to mainland China were 17 tons in August, while shipments to Hong Kong more than doubled to 36.2 tons from the previous month, according to data from the Swiss Federal Customs Administration. Consumption in India may reach about 230 tons in the final quarter, according to Bachhraj Bamalwa, a director with the All India Gems & Jewellery Trade Federation. That’d be the highest for the period in three years, WGC data show.

Some analysts were wary about reading too much into the Shanghai gold withdrawals because of the risk of double-counting.

“The exchange doesn’t disclose other data, for example we don’t know the tonnage delivered into its vaults,” said Jiang Shu, chief analyst at Shandong Gold Financial Holdings Capital Management Co. “Gold for leasing or other transactions might be counted as a withdrawal more than once.”

Gold headed for its fifth straight quarterly loss on Wednesday, the worst streak since 1997.

Source: Bloomberg