Gold market balanced in 2019, World Gold Council says

This is an edited summary from the World Gold Council, based on its “Gold Demand Trends Full Year and Q4 2019” report. To access the report, visit www.gold.org.

Gold demand fell 1% in 2019 as a huge rise in investment flows into ETFs and similar products was matched by the price-driven slump in consumer demand.

It was a year of two distinct halves: resilience and growth across most sectors in the first half of 2019 contrasted with widespread year-over-year declines in the second half of the year.

Global demand in the second half of the year was down 10% on the same period of 2018, as year-over-year losses in the fourth quarter compounded those from the third quarter, notably in jewellery demand and retail bar and coin investment.

Central bank demand also slowed in the second half of the year — down 38% in contrast with the first half’s 65% increase. But this was partly due to the sheer scale of buying in the preceding few quarters, and annual purchases nevertheless reached a remarkable 650.3 tonnes — the second-highest level for 50 years.

ETF investment inflows bucked the general trend. Investment in these products held up strongly throughout the first nine months of the year, reaching 256.3 tonnes in the third quarter. Momentum then subsided in the fourth quarter, with inflows slowing to 26.8 tonnes (-76% year over year).

Technology saw modest declines throughout the year, although electronics demand staged a minor recovery in the fourth quarter. The annual supply of gold increased 2% to 4,776.1 tonnes. This growth came purely from recycling and hedging, as mine production slipped 1% to 3,436.7 tonnes.

Highlights

• Total fourth quarter demand fell 19% from the year-earlier quarter to 1,045.2 tonnes. Two main contributors to the drop were jewellery and physical bar demand, which reacted to the elevated gold price. In US dollar value terms, the decline in fourth-quarter demand was much shallower — down just 3% to US$49.7 billion.
• Inflows into global gold-backed ETFs and similar products pushed total holdings to a record year-end total of 2,885.5 tonnes. Holdings grew by 401.1 tonnes over the year, with 26.8 tonnes added in the fourth quarter. Inflows were heavily concentrated in the third quarter, as the US dollar gold price rallied to a six-year high.
• Central banks were net buyers for a 10th consecutive year: global reserves grew by 650.3 tonnes (-1% from 2018), the second-highest annual total for 50 years. Purchasing in the fourth quarter of 109.6 tonnes was 34% lower than the fourth quarter of 2018, although this was partly a reflection of the sheer scale of buying in 2018.
• China and India held sway over global consumer demand. Together, the two gold consuming giants accounted for 80% of the year-over-year decline in fourth quarter jewellery and retail investment demand. High gold prices and a softer economic environment were the main factors.
• Total annual gold supply edged up 2% to 4,776.1 tonnes. An 11% jump in recycling was the main reason for the increase, as consumers capitalized on the sharp rise in the gold price in the second half of the year. Annual mine production was marginally lower at 3,463.7 tonnes – the first annual decline for more than 10 years.
• The gold price averaged US$1,481 per oz. in the fourth quarter. This was the highest average price since the first quarter of 2013. Although the price remained below the third-quarter high, it was well supported. And gold priced in various currencies — including Euros, Indian rupees and Turkish lira — hit their highest levels in history.