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Is China Continuing to Hoard Gold?

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Demand fell in August

The rise in precious metal prices this year had a negative impact on the demand for gold—including the physical demand in many countries. China is the largest gold manufacturer and buyer. However, its demand figures suffered in 2016. Chinese gold imports from Hong Kong totaled 51 tons in August—down 15% from 59 tons a year earlier. The number in August fell 45% from 91 tons reported in July. It’s the lowest monthly volume since January 2016.

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Higher imports

Hong Kong’s year-to-date imports were 555 tons—around 15% higher than 482 tons reported in the same period in 2015. Currently, the total gold imports into China this year stand at 746 tons—up 15% from 648 tons for the same period in 2015. The figure was obtained after adding imports from Switzerland to the Chinese mainland.

Increasing reserves

China has likely been stocking up on gold. In related news, China introduced a new yuan-denominated gold fix for enhancing its pricing power over gold.

China’s gold reserves rose to ~1,797.5 tons in 1Q16 from ~1,762.3 tons in 4Q15. However, gold only represents 2.2% of China’s foreign reserves, so it’s probably safe to expect more heavy buying going forward. 

The funds that also closely follow precious metals include the SPDR Gold Trust (GLD) and the iShares Silver Trust (SLV). These two funds closely track gold and silver’s performance, respectively. The mining shares that also take much of their price movements from these metals include Sibanye Gold (SBGL), Gold Fields (GFI), Newmont Mining (NEM), and New Gold (NGD).

 

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