WGC: Gold Demand +2% 2016 on Investment Demand
Friday, data from the World Gold Council showed that a bounce in investment to a 4-year high drove a modest gain in Gold demand in Y 2016, even as use of the metal in jewelry slid to its lowest since Y 2009 and coin and bar buying dipped.
Global demand for physical Gold in the form of jewelry, coins and bars fell 9% as higher prices and import curbs hurt demand, particularly in the major Chinese and Indian markets.
Central banks also bought a third less Gold.
However a surge in investment in Gold-backed ETFs (exchange-traded funds) offset that to lift overall Gold demand by 2% to 4,309 tonnes, its highest since 2013.
“There are three primary factors that fueled strong inflows into ETFs — we had the spread of negative interest rates, then the steady pushback in expectations surrounding U.S. interest rate (hikes), and the uncertainty stemming from geopolitical risk,” said Alistair Hewitt, head of market intelligence for the industry-funded WGC.
“Investment as a whole posted its best year since Y 2012, but elsewhere demand was subdued.”
ETF buying saw its strongest quarter on record in the 1st 3 months of last year, with 342.3 tonnes added to funds, chiefly in the United States and Europe. Britain, where the GBP fell after the June vote to leave the EU saw demand rising 28% to 10.9 tonnes.
Global jewelry demand, the single biggest demand segment for Gold, fell 15% to 2,042 tonnes.
Indian consumer demand fell 21% last year to 675.5 tonnes, its lowest since Y 2009, as prices rose and import curbs were introduced.
The WGC sees it remaining close to this level this year, at 650-750 tonnes.
Demand in #1 consumer China is expected to improve to 950-1,000 tonnes, after it fell 7% last year to 913.6 tonnes, its weakest since Y 2012.
Central bank demand was in positive territory for a seventh straight year, but was at its lowest since 2010 at 383.6 tonnes.
“If you look at gold as a percentage of FX reserves, the twin effects of FX reserves coming down and the gold price rising has boosted gold as a reserve asset across central banks around the world,” Mr. Hewitt said. “That has been another factor that weighs on reserve managers’ minds.”
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