Q1 global gold demand buoyed by jewellery sales in China, India

The following is an edited excerpt from the World Gold Council’s summary of its report, Gold Demand Trends Q1 2013. The full report can be found at www.gold.org.

This year’s  World Gold Council gold demand trends report, which reports on the period from January to March, shows a market driven by diverse global demand, and a continued appetite for owning gold jewellery.

Total jewellery demand was up 12% year-on-year in the first quarter of 2013, driven mostly by Asian markets. Jewellery demand in China was up 19% on the same period last year and stood at a record 185 tonnes. Demand in both India and the Middle East was up 15%, and in the U.S. demand showed a significant increase, up 6% for the first time since 2005.

Demand for gold in China and India was also driven by an increase in bar and coin sales — up 22% year-on-year in China and 52% in India. In the U.S., demand for bars and coins was up 43% compared with the same quarter in 2012. Globally, bar investment was up 8% while official coins (such as American Eagles and Canadian Maple Leafs) were up 18%. Gold held by gold-backed exchange-traded funds (ETFs), which in 2012 accounted for 6% of the world’s gold demand, fell by 177 tonnes.

Central banks remained big gold acquirers, purchasing 109 tonnes, and marking the seventh consecutive quarter of purchasing over 100 tonnes.

Overall total global demand for gold in this year’s first quarter was 963 tonnes, down 19% from the fourth quarter of 2012.

 “The price drop in April, fuelled by non-physical moves in the market, catalyzed a surge of buying that has left many retailers short of stock and refineries, introducing waiting lists for deliveries. Putting this into context, sales of bars and coins, jewellery and consumption in the technology sector still make up 81% of the market,” managing director of investment Marcus Grubb said at the World Gold Council.

“What these figures show is that even before the events of April, the fundamentals of the gold market remain robust, with growing demand in India and China, central banks consistently adding gold to their reserves and strong buying of investment products, such as gold bars and coins.”

In value terms, gold demand in the first quarter of 2013 was US$51 billion, down 23% compared to the last quarter of 2012. The average gold price of US$1,632 per oz. was down 5% on the average fourth-quarter 2012 price, and down 3% during the same period the previous year.

Key findings

•  Total demand in China totalled 294 tonnes in the first quarter — a 20% rise on the same quarter last year — while the economy picked up from the downturn experienced in the second half of 2012. Of that figure, jewellery demand in the quarter was a record 185 tonnes, up 19% from last year, while bar and coin investment was 110 tonnes, rising 22% since last year.

•  The Indian market also demonstrated an appetite for gold. Total demand was 257 tonnes, up 27% on the same quarter last year. Retail investment was up 52% while jewellery was up 15% from last year’s first quarter.

•  This year’s first quarter was the seventh consecutive quarter in which central banks acquired more than 100 tonnes of gold, and the ninth consecutive quarter in which central banks have been net purchasers, as they diversify their portfolios.

•  ETFs saw a net outflow of 177 tonnes in the quarter. By contrast there were strong inflows into other forms of investment: bar and coin demand was 378 tonnes, which is 10% higher than last year.

“Gold-backed ETFs, which made up 6% of gold demand in 2012, have seen some holders, primarily in the U.S., collect profits and move into equities,” Grubb says. “While gold ETF holdings are down, this has been balanced by 378 tonnes of investment in bars and coins, an increase of 10% on the same period last year, and up 12% on the last quarter of 2012.

“Overall, the long-term appetite for investment remains strong, demonstrated by the continued demand for bars and coins,” he says.

Demand and supply statistics for Q1 2013

•  Gold demand of 963 tonnes was down 13% compared with the year-earlier quarter.

•  The value measure of gold demand was US$51 billion, down 16% from the year before.

•   The average gold price was US$1,632, off 3% from the year before.

•  The net outflow from ETFs was 177 tonnes in the quarter. That fall pushed the sum of ETF and total bar and coin demand to just below 201 tonnes. Total investment demand was 320 tonnes in the first quarter of 2013, flat compared with a year ago.

•  Demand in the jewellery sector was up 12% to 551 tonnes. Jewellery demand in China was 185 tonnes, while demand in India was 160 tonnes.

•  Demand in the technology sector was 102 tonnes, down 4% from the previous year.

•  Total mine production was up 4% from last year at 688 tonnes. Recycling fell 4%, resulting in a total supply that is 1% higher than a year ago.