Global gold demand drops by 18%

Tammy Harvey
May 6, 2017

Inflows into gold-backed ETFs of 109t were largely concentrated in Europe. That's also nearly one-third lower than the 108.5 tonnes seen in the fourth quarter of 2016. Chinese investors were central to the increase, attracted by the momentum behind the price rise ahead of the seasonally-important Chinese New Year.

Gold ETFs were hardest-hit by the slide in demand: the 109.1 tons of the precious metal bought are only a fraction of demand in the first quarter of previous year.

After a whirlwind end to 2016, Indian consumers enjoyed a period of relative stability in the domestic market, buoying demand.

The combination of the wedding season, Akshaya Tritiya festival and continued remonetisation of India's economy should support gold jewellery demand, he said.

Total investment demand for Q1 2017 was up by 14 per cent at 31.2 tonne in comparison with Q1 2016 (27.5 tonne). Incidentally, China's purchasing programme was on a pause during the quarter as its foreign exchange reserves remained under pressure.

However, total Middle East consumer demand, including bars, coins and jewellery, rose five per cent to 64.5 tonnes, the highest since the third quarter of 2015.

"Though we did not see a surge in ETF inflows as was experienced in the first quarter of 2016, inflows in the current quarter was good with strong interest from European investors", Hewitt said.

Balancing that, global jewellery consumption, the single largest demand segment, was a touch higher, while coin and bar demand rose 9 per cent.

"Elsewhere the picture was less rosy; central bank demand was down and jewellery demand is still in the doldrums", Hewitt said.

India bought 123.5 tonnes of gold during the first quarter up from 107.3 tonnes in Jan-March a year ago, indicating a return of optimism in the industry, according to WGC.

The report further said that mine output of 764 tonne was slightly changed from the first quarter of 2016 (of 768 tonne), and it is in line with the prediction that the production will remain largely steady before declining.

There was also a 21 per cent fall in recycling to 283 tonne from 360 tonne during Q1 past year. "The 9% rise in the US$ price between end-December and end-March restrained demand, although USA dollar weakness meant that consumers in many markets were protected to some degree". He also said that the government should come out with a recycling policy and simplify the record keeping process in dealing with old gold, post the GST regime. Chinese gold demand in the given three month period fell 2%, at 176.5 tonne.

Other reports by Ligue1talk

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