Shanghai Gold Exchange
Chinese gold withdrawals from the Shanghai Gold Exchange (or SGE) are a good indicator of China’s demand for physical gold. According to many gold experts, these withdrawals closely reflect the country’s actual demand.
All the mined and imported gold in China can only sell through the Shanghai Gold Exchange. By tracking SGE data, investors can get a good sense of the short-term direction for demand in China.
Shanghai Gold Exchange withdrawals also point to the short-term direction of gold prices (GLD). This impacts gold stocks such as Goldcorp (GG), Kinross Gold (KGC), and New Gold Inc. (NGD). It also impacts gold ETFs such as the VanEck Vectors Gold Miners ETF (GDX). GG and ABX together form 14.3% of GDX.
The Shanghai Gold Exchange releases withdrawal data every week. In 2014, SGE withdrawals amounted to 2,102.4 tons. While demand was strong, the figure was 95 tons lower than it was in 2013.
So far, 2015 has seen strong gold demand in China. For the week ended March 20, 53.5 tons of gold were withdrawn, which is up 3.9% from the prior week. From the beginning of the year through the week ended March 20, 562 tons of gold had already been withdrawn from the SGE, up 7.3% from 2014. This indicates strong gold demand from Chinese consumers.
Traditionally, Chinese consumers are known for buying on any dips. They’re probably buying again after the recent gold price weakness.