Why Shanghai Gold Exchange withdrawals matter for investors

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Shanghai Gold Exchange

Chinese gold withdrawals from the Shanghai Gold Exchange (or SGE) are a good indicator to track China’s physical gold demand. According to many gold experts, it’s close to the actual Chinese physical gold demand.

All the mined and imported gold in China can only sell through the SGE. By tracking this data, investors can get a good picture of the short-term direction for China’s physical gold demand. It also shows the short-term direction for gold prices (GLD). This impacts gold stocks like Goldcorp (GG), Barrick Gold (ABX), and Newmont Mining (NEM). It also impacts gold ETFs like the Gold Miners Index (GDX).

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Tracking SGE withdrawals

The SGE releases this data every week. Year-to-date, 1,760 tons of gold have been withdrawn through the SGE. For the week ending November 14, 52 tons of gold were withdrawn. Since the end of August, withdrawals from SGE have been stronger compared to the trend over the first six months of the year. For the third quarter, 480.7 tons have been withdrawn compared to 387.4 tons in the second quarter.

This means that there’s strong physical demand for gold in China. Traditionally, Chinese consumers are known for buying on any dips. They’re probably buying again after the recent gold price weakness.

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