World Gold Council: Gold demand off to a soft start in 2018

The following is an edited summary from the World Gold Council, based on its Gold Demand Trends Q1 2018 report. To access the full report, visit www.gold.org.

Gold demand had a soft start to 2018, reaching 973 tonnes — the lowest first quarter since 2008. This largely came from 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 came flat at 488 tonnes (15.69 million oz.), down 1% on first-quarter 2017. 

Demand in China was buoyed by holiday demand, and U.S. demand improved 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 U.S. drove weakness in bar and coin investment: global demand was down 15% to 254.9 tonnes (8.2 million oz.). 

The range-bound gold price undermined investor interest in these markets, although China’s weakness partly owed to exceptional strength in first-quarter 2017.

ETFs saw their fifth straight quarter of inflows. Holdings grew 32 tonnes (1.03 million oz.), due to growth in North America. Investment in the first quarter was mixed, with rising interest rates on the one hand, and a spike in stock-market volatility on the other. With gold prices relatively subdued, many investors lacked a clear signal. 

Central banks added 116 tonnes (3.7 million oz.) to global official reserves in first-quarter 2018. This was the highest first-quarter total in four years, and in line with average quarterly purchases since first-quarter 2010 of 115 tonnes. 

Russia, Turkey and Kazakhstan again dominated the list of central banks buying gold, adding 91 tonnes between them. 

Demand for gold in the technology sector improved, up 4% during last year’s first quarter. The wireless sector grew, with 3-D sensors for facial recognition increasingly used in smartphones, gaming consoles and security systems.

The total supply of gold increased 3% in first-quarter 2018 to 1,064 tonnes (34.2 million oz.), due to more mine production and net hedging. Mine production and recycling levels saw fractional increases compared with first-quarter 2017, at 770 tonnes (24.8 million oz.) and 288 tonnes (9.3 million oz.), respectively. 

The Q1 report’s key findings

• Overall demand was 973 tonnes, a decrease of 7%, compared with 1,047 tonnes in first-quarter 2017.

• Total consumer demand fell 6% to 743 tonnes, from 790 tonnes in the same period last year.

• Total investment demand was down 27% to 287 tonnes, compared with 394 tonnes in first-quarter 2017.

• Global jewellery demand fell 1% to 488 tonnes, from 492 tonnes in the same period in 2017.

• Central bank demand grew 42% to 116 tonnes, compared with 82 tonnes in first-quarter 2017.

• Demand in the technology sector increased 4% to 82 tonnes, compared with 79 tonnes in first-quarter 2017.

• Total supply was up 3% to 1,064 tonnes, from 1,032 tonnes in the same period last year.

• Recycling was virtually unchanged at 288 tonnes, compared with 287 tonnes in first-quarter 2017.