Gold demand had a soft start to 2018, reaching 973 tonnes (t), the lowest first quarter since 2008. This was largely caused by a fall in investment demand for gold bars and gold-backed exchange-traded funds (ETFs), as a subdued gold price environment hampered demand.
Global jewellery demand was roughly flat at 488t, down 1% on Q1 2017.Demand in China was buoyed by holiday demand, and US demand continued to improve in response to the supportive economic backdrop. In contrast, Indian consumers were discouraged by rising gold prices, exaggerated by a weakening rupee, with demand down 12% compared with 2017.
China, Germany and the US drove weakness in bar and coin investment: global demand was down 15% to 254.9t. The range-bound gold price undermined investor interest in these markets, although China’s weakness was partly due to exceptional strength in Q1 2017.
ETFs saw their fifth consecutive quarter of inflows. Holdings grew by 32t, due solely to growth in North America. Investment in the first quarter was mixed, with rising interest rates on the one hand, and a sharp spike in stock market volatility on the other. As gold prices were relatively subdued, many investors lacked a clear signal.
Central banks added 116t to global official reserves in Q1 2018. This was the highest Q1 total for four years and in line with average quarterly purchases since Q1 2010 of 115t.
Russia, Turkey and Kazakhstan again dominated the list of central banks buying gold, adding 91t between them.
Demand for gold in the technology sector continued to improve, up 4% on Q1 last year. The wireless sector was a key area of growth as 3D sensors for facial recognition were increasingly deployed in smartphones, gaming consoles and security systems.
Alistair Hewitt, Head of Market Intelligence at the World Gold Council, commented: “Relatively solid global economic growth, coupled with the return of volatility in the capital markets in February, created a stable environment for gold in Q1 – while equity markets around the world came under pressure, the gold price rose.
Although demand was down year-on-year, we saw encouraging levels of jewellery demand in China, the US and Europe, continued growth in the technology sector, and steady inflows into ETFs, albeit at a slower pace than last year. Solid inflows into central bank reserves also highlight the ongoing relevance of gold as a strategic asset for institutional investors.”
The total supply of gold increased by 3% in Q1 2018 to 1,064t, due to increased mine production and net hedging. Mine production and recycling levels both saw fractional increases compared with Q1 2017, at 770t and 288t respectively.
The key findings included in the Gold Demand Trends Q1 2018 report are as follows:
· Overall demand was 973t, a decrease of 7% compared with 1,047t in Q1 2017
· Total consumer demand fell by 6% to 743t, from 790t in the same period last year
· Total investment demand was down 27% to 287t compared with 394t in Q1 2017
· Global jewellery demand fell 1% to 488t, from 492t in the same period in 2017
· Central bank demand grew by 42% to 116t compared with 82t in Q1 2017
· Demand in the technology sector increased 4% to 82t compared with 79t in Q12017
· Total supply was up 3% to 1,064t, from 1,032t in the same period last year
· Recycling was virtually unchanged at 288t, compared with 287t in Q1 2017