Insights

• In August, Shanghai Gold Benchmark (PM) rose 11% to 355 yuan/gram and the local gold premium peaked at a six-year high.
• While Au(T+D)’s trading volume in August surged to a new all-time high, gold withdrawals from the Shanghai Gold Exchange (SGE) declined again last month.
• Gold imports dropped to 44t in July, the lowest since 2017.
• The People’s Bank of China (PBoC) added another 6t to its gold reserves in August.

In recent years, expansion into tier three and four cities has been a major strategic focus for many Chinese jewellery retailers. Chow Tai Fook (CFT), a leading retailer based in Hong Kong, added 251 points of sales (POS) in lower tier cities in 2018 compared to only 50 in tier one cities. Lao Feng Xiang, another large jeweller with 3,521 POS domestically, also prioritised expansion into lower tier cities.

• Chinese gold prices rose modestly in July 
• Au(T+D)’s trading volume in July extended its June surge
• The local gold premium saw a much lower volatility 
• Imports registered another decline, dropping to 55t in July
• Gold withdrawals from Shanghai Gold Exchange (SGE) experienced the first rise in four months 
• The People’s Bank of China (PBoC) added another 10t to its gold reserves

Madame Wu Xiaoling, Chairwoman of the Board of the PBC School of Finance, Tsinghua University and former Deputy Governor of the People’s Bank of China, believes that gold has a crucial role to play in China’s continuing development and the internationalisation of the RMB. 

Recycled gold is an important source of gold supply . In 2018, the volume of recycled gold reached 1,168t, accounting for over 25% of total supply globally. Recycled gold is also an important source of supply in China, amounting to 146t, or 20% of domestic supply in 2018. Recently, China’s recycled gold market has experienced some exciting developments which could improve the efficiency and transparency of the industry. 

Summary

• Shanghai Gold Benchmark price hit 319.2 yuan/gram – highest level since its introduction in April 2016
• Au(T+D)’s trading volume in June reached second highest level on record – 2,062t
• The local gold premium rose sharply 
• Imports continued to slide in May, dropping to 69t
• Gold withdrawals from Shanghai Gold Exchange (SGE) fell again last month 
• PBOC added a further 10t to its reserves in June

In March the amount of gold that left Shanghai Gold Exchange vaults - also known as the SGE loadouts - hit 218t. This is a chunky number. It is the highest March on record, almost 30% higher than the average monthly loadout since the start of 2016 and a 13% increase on March 2018.