The rise in gold purchases by central banks to the highest since Y 1967 helped push global demand for the metal up 4% last year, the World Gold Council (WGC) said Thursday.
The world consumed 4,345.1 tonnes of gold in Y 2018, up from 4,159.9 tonnes in Y 2017, the WGC said in its latest Quarterly demand trends report.
Driving the increase were central banks which bought 651.5 tonnes, that is 74% more than in Y 2017 and the second highest annual total on record, as countries including China and Poland joined Russia, Turkey and Kazakhstan in adding to their reserves, the WGC said.
Jewelry demand was flat to Unchanged at 2,200 tonnes, with rising consumption in China, the United States and Russia offsetting a decline in the Middle East and a very slight fall in India.
Retail investment in gold bars and coins grew 4% to 1,090.2 tonnes helped by a 222% rise in demand in Iran to almost 62 tonnes, according to the WGC.
Interest from financial investors was muted, with ETFs adding 68.9 tonnes to their holdings over the year, down 67% from Y 2017.
That changed in Q-4 of Y 2018, as rising economic uncertainty in China and elsewhere rippled through markets.
Demand for gold in electronics and for jewelry fell as consumers scaled back spending, while investment demand rebounded and ETFs saw large inflows in the Q.
Gold is traditionally seen as a safe investment in times of political or economic turbulence.
“Economic uncertainty, slowdown, and the US-China trade conflict supported investment flows,” said the WGC’s head of market intelligence.
“The flip side is that it hit some elements of the market,” he said, adding that this dynamic is likely to run through Y 2019.
Expecting central bank purchases to grow again this year and that demand in the 2 largest gold markets, China and India, will remain firm, with China consuming 900-1,000 tonnes and India 750-850 tonnes in Y 2019.
Global supply of gold grew by 1% to 4,490.2 tonnes last year, the WGC said.
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