This view of Chinese platinum demand comes because we have an usually high degree of information on Chinese purchases on a daily basis. Turnover on Shanghai Gold Exchange (SGE) is effectively as sale, as metal transacted cannot be resold on the exchange. While this doesn't account for all of Chinese apparent demand, it is a big proportion of it.
As the chart left shows, there are usually very big spikes in sales on the SGE when prices fall very sharply. But looking at this behaviour on a daily basis misses the point that purchases on the SGE since Chinese New Year have been very strong, even though prices are not that much lower than the same period in 2012.
To put some numbers on it, SGE sales have been 44% higher relative to the comparative period in 2012, with prices being only 5% lower.
SGE sales are not final consumption and some of this could be stock build. But the fact that jewellery makers are willing to stock build at these prices suggests that end demand must be strong.
This is also not a small portion of the overall demand/supply equation. While many would be turned off from platinum because of the dire state of European auto markets, Chinese jewellery is actually much bigger than net demand for European autocatalysts (when accounting for recycling).
So while Chinese demand might be a price cushion over short periods of time, it does appear that stronger Chinese demand is supportive of higher platinum prices over a meaningful time horizon for most investors.
