Global consumer demand for gold at unprecedented levels, China world’s largest gold market

Consumers around the world bought gold in record amounts in 2013, led by demand in China and India, with China becoming the world’s biggest gold market, according to the latest World Gold Council Gold Demand Trends report.

In Western markets consumer demand also remained strong with the US, in particular, having a robust year in the jewellery, bar and coin sectors.

In 2013 the gold market saw 21 per cent growth in demand from consumers which contrasted with outflows of 881 tonne from ETFs. The net result was that global gold demand in 2013 was 15 per cent lower than in 2012, with a full year total of 3,756 tonne.

Annual global investment in bars and coins reached 1,654 tonne, up from 1,289 tonne in 2012, a rise of 28 per cent and the highest figure since the World Gold Council’s data series began in 1992.

For the full year, Chinese and Indian investment in gold bars and coins was up by 38 per cent and 16 per cent, respectively. Although much smaller markets in terms of volume, in the US, bar and coin demand was up by 26 per cent to 68 tonne and in Turkey it was up by 113 per cent to 102 tonne, demonstrating solid support on a global basis.

Meanwhile demand for jewellery, the other component of consumer demand, increased by 29 per cent from 519 tonne to 669 tonne in China, and by 11 per cent from 552 tonne to 613 tonne in India, reaching 2,209 tonne globally, the highest figure seen since the onset of the financial crisis in 2008.

"2013 has been a strong year for gold demand across sectors and geographies, with the exception of western ETF markets," managing director of the Investment Strategy at the World Gold Council Marcus Grubb commented.

"Specifically, it was the year of the consumer," he said, adding that although demand has continued its shift from West to East, the growing demand for gold bars, coins and jewellery is a global phenomenon. "Taken together, the statistics demonstrate the resilience of the gold market and the unique nature of gold as an asset class, rebalancing to reflect the economic environment."

The key findings of the report are:

• Consumers remain key drivers in the demand for gold: Globally, consumers bought 3,864 tonne of gold last year, 21 per cent higher than in 2012.
• Jewellery demand: Jewellery demand for the year rose by 17 per cent to 2,209 tonne, while investment in bars and coins was up by 28 per cent to 1,654 tonne.

• China and India both recorded increased demand in 2013. Consumer demand in China rose by 32 per cent in 2013 to a record level of 1,066 tonne, while in India demand rose by 13 per cent to 975 tonne.

• Global consumer demand strengthens: Across the world there were large increases in consumer appetite for gold in both emerging and developed markets. Demand in Turkey was up by 60 per cent, Thailand up by 73 per cent and the US up by 18 per cent.
• Indian demand remained strong: Despite several import related curbs during 2013, gold demand remained buoyant, with a full-year total of 975 tonne compared to 864 tonne in 2012. Unofficial imports estimated almost doubled compared with 2012, to compensate for the decline in official imports.

• Central banks: Although down by 32 per cent on 2012 they continued to be strong buyers of gold, a trend which began in 2009. The year 2013 saw net purchases in all four quarters, totalling 369 tonne, meaning 12 consecutive quarters of net inflows.

• ETFs: There was a net outflow from ETFs of 180t in Q4 as investors continued to re-evaluate their portfolios in response to market conditions. In total, investors redeemed 881t from ETFs in the full year.

• Technology: Technology demand reached 405 tonne in 2013, virtually unchanged from the figure of 407 tonne in 2012.

• Average price of gold for the year was $1,411/oz, down by 15 per cent on 2012.

• Global demand for jewellery was 2,209 tonne for the year, up by 17 per cent on 2012.

• Globally, there was record bar and coin demand for the year, which was up by 28 per cent on 2012, to 1,654 tonne.

• Demand in the technology sector was 405 tonne, virtually unchanged from the 407 tonne seen in 2012.

Gold demand and supply statistics for the fourth quarter of 2013

Consumer demand in China was up by four per cent in fourth quarter of 2013 compared with the same period last year. Consumer demand in India fell by 16 per cent to 219 tonne. Overall, global jewellery demand was up by six per cent, while total bar and coin fell by six per cent. Central banks were net purchasers of gold for the 12th consecutive quarter, while there were outflows totalling 180 tonne from ETFs in the quarter.

Gold price dips by Rs 1,200 in a single day

Gold today witnessed the second largest drop in prices within a month in a single trading day, as the price of the precious yellow metal retreated by Rs 1,200 a tola (11.664 grams).

The price of gold is fixed today at Rs 50,000 a tola, which stood at Rs 51,200 yesterday. In the international bullion market, gold fell to $1,400 per troy ounce following the low US inflation data.

Investors chose to liquidate gold as the US wholesale prices fell by 0.7 per cent in April. The higher rate of price slump removed the need of holding gold that is considered a hedge against inflation.

Back in April 16, gold price had dropped by Rs 3,300 to Rs 49,500 per tola in the domestic market following panic selling by gold hoarders in the international bullion market.

The possible sell-off of gold by Cyprus and further monetisation of gold reserves across Europe, Goldman Sachs taking short position on gold, and the possibility of the US Federal Reserve ending Quantitative Easing sooner, had impelled investors to sell gold back then that pulled down the price.

Likewise, fourth quarter recovery in the jewellery sector continued into the first quarter of 2013, according to the World Gold Council's Gold Demand Trends that has claimed that investment demand has however, declined. The report attributed decline in investment demand — relative to first quarter of 2012 — to the net outflows from ETFs, which obscured the strong rise in investment for gold bars and coins at the retail level. "Likewise, central banks have added 109.2 tonnes of gold to their reserves in the first quarter of 2013, the ninth consecutive quarter of net purchases," it said, adding that global gold supply has also witnessed a little change in the first quarter of 2013 compared to the first quarter of 2012, and stood at 1,051.6 tonnes.

However, global first quarter gold demand of stood at 963 tonnes was valued at $50.5 billion. India and China accounted for 62 per cent of first quarter global jewellery demand, generating year-on-year growth of 15 per cent and 19 per cent, respectively. Likewise, global jewellery demand of 551 tonne was worth a record $28.9 billion, surpassing the previous quarter's record.

Chinese demand in gold bars and coins grew to 109.5 tonnes, and more than double the five-year quarterly average of 43.8 tonnes, it added.

Similarly, central banks also added 109.2 tonne of gold to their reserves in the first quarter of 2013, the ninth consecutive quarter of net purchases. The sector accounted for 11 per cent of demand in the first quarter, worth a value of $5.7 billion. “At 1,051.6 tonne, total gold supply was little changed in the first quarter,” it said, adding that mine production in first quarter of 2013 generated 688 tonne of supply, four per cent more than first quarter of 2012.

India and China to lead gold demand

Gold, at record-breaking levels as global economic worries mount, will see sustained demand from key markets India and China this year despite high prices, the World Gold Council (WGC) said on Thursday.
Global demand for the second quarter to June was 919.8 tonnes, down by 17 per cent year-on-year, from 1,107 tonnes in the same period last year, as the "remarkably" high European investment seen earlier levelled off.
The World Gold Council, an industry body, said demand for gold was still "healthy", particularly for jewellery, despite the decline in demand, which steadied after the heavy investment in the last 12 months in gold exchange traded funds.
The 2011 June-end quarter was the second-highest quarterly value ever at $44.5 billion, the WGC said in a report.
The highest-ever quarterly demand for gold was valued at $44.7 billion in the three months ended last December, the council said.
WGC expects demand for gold to remain strong for the rest of the calendar year, driven by demand from India and China.
The impact of Eurozone and US debt crisis, inflationary pressures and buying from global central banks will also boost investment demand for gold, it said.
"The strength of demand in India and China, coupled with an overall drop in recycling activity this quarter, demonstrates that consumers have adjusted to the current price environment," said Marcus Grubb, WGC investment managing director, said in the emailed report.
"In addition, ongoing macro economic uncertainty, the continued sovereign debt crisis and widespread inflationary pressures, will result in gold demand remaining strong," Grubb said.
India and China are battling high inflation, alongside other Asian economies like Vietnam, Indonesia, South Korea and Thailand (VIST).
"High inflation has become a positive driving force for gold (amongst the VIST countries), the report said.
India is the world's biggest importer and consumer of gold. It constituted over a third of global gold demand, while China's share is also expanding rapidly.
Indians bought 540 tonnes of gold in the first-half of 2011, up by 21 per cent from the same period last year.
"This growth is likely to continue, due to increasing levels of economic prosperity and high levels of inflation," research analyst Louise Street said in the report, describing demand for gold from India and China.
Year-on-year demand for gold grew by 38 per cent in India in the second quarter ended June and China by 25 per cent, the report said.
Gold jumped to a record $1,814.95 per ounce this week after global equities markets slumped and investors were spooked after the US sovereign debt downgrade and growing concerns about the Eurozone crisis.
The precious metal, whose key drivers are investment and jewellery, is widely seen as a safe haven in times of economic uncertainty and high inflation.
WGC said the "still-fragile outlook" for economic growth will continue to drive people to buy gold as a form of investment.
Demand for gold is likely to increase in India in the coming weeks, as key religious festivals get under way, where the metal is often bought or gifted.
Demand traditionally leaps in India during its main wedding season from October to December and also during religious festivals when India's nearly 900 million Hindus believe it is lucky to purchase gold jewellery, coins and bars.