Editors Note – Be sure and check out the conversation I will be having with Ken Schortgen on The Gadfly on the topic of Central Bank Gold this Friday May 10!! – click here to check it out!
With China being the largest producer of gold and the largest consumer of gold it’s important to know what’s happening with China’s gold mining and consumer market. Otherwise you are missing a significant piece of the overall picture. This is why when Chinese government moves back into the gold market, as they have over the past 5 months, this gets the attention of everyone who follows the gold market. This is a significant change as China left the open gold market in October 2016 and was absent until December 2018 a full 25 months.
Today we learned a little about the first quarter of 2019 gold consumption within the Chinese borders. We haven’t been reporting on this as the information has been scattered and not well concentrated. Hopefully this is going to change. If China and Russia are planning on making gold part of the global trade settlement mechanism, China must follow Russia’s lead and be a lot more transparent about what’s happening with their gold.
First we learned that consumer level gold jewelry is either up 0.69 percent or 4.18 percent year over year. The first piece of information is a little confusing in that it discusses jewelry and mining. It appears, but this is merely a guess, the author was attempting to explain that mining production was up 0.69 percent in the face of “cuts in gold production”. Then goes on to discuss the rise in gold jewelry. We aren’t the author but thats the way I read it.
Gold consumption in China reached 286.93 metric tons during the first quarter, up 0.69 percent year-on-year, against the backdrop of cuts in gold production by China planned for the first six months of this year, according to the China Gold Association.
Better designs and varieties, together with the higher added value, boosted consumption of the yellow metal jewelry, with consumption via the jewelry sector increasing steadily to reach 188.05 tons in the first quarter, up around 4.18 percent year-on-year, it said. Source
Demand for gold bars and coins dropped in the first quarter of 2019 by 4.42% for bars and a whopping 62.96% for gold coins.
Personally, I find the mining production information to the most interesting. This tells us more about global gold than merely Chinese gold. China is a major player in the gold market and over the past 5 years has become an aggressive buyer of gold mines around the world. If China is not currently the largest holder of gold mines they soon will be.
According to the association, China’s gold output dropped by 5.54 percent year-on-year in the first quarter, reaching 92.78 tons, as a result of miners’ production cuts, suspension of production due to environmental and technical issues, and upgrade of production lines in regions including Henan, Gansu and Inner Mongolia.
Zhu said China’s gold industry is switching from high output growth rate to seeking growth via advanced technology and environmental-compliance production process.
“Amid the production drop domestically, Chinese gold producers are accelerating the overseas expansion,” she said.
“Gold output from overseas by major Chinese producers reached 23.4 tons in 2018, accounting for 6 percent of China’s total domestic output.” Source
While their domestic gold production decreased to approximately 370 tons per annum it appears China is making up for it in offshore gold mining production. It will be interesting to watch this dynamic over the next decade as mining giants like Barrick and Newmont consolidate and try to stay ahead of the ever changing landscape in the gold mining world.
