Global gold demand drops by 18%

Global gold demand drops by 18%

Demand for gold in India during Q1 2017 was at 123.5 tonnes against the 107.3 tonnes in Q1 2016.

Gold demand was up 15 per cent in the quarter ended March, at 123 tonnes, against 107 tonnes logged in the same period previous year, largely due to stable prices and a lower base.

Total global investment demand for gold saw a first quarter drop of 34% from the same period a year ago, said a report from the World Gold Council released Thursday.

In total, gold investment demand was at 399 metric tons, for the first quarter of 2017. Slower inflows of exchange traded funds (ETFs) and lower central bank demand also contributed to the decrease.

In Turkey, jewelry demand dropped to a four-year low of 7.7 tons due to high gold prices and the recent referendum process.

Global jewellery demand for gold remained nearly flat at 480.9 tonnes but below the five-year quarterly average.

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Shamlal Ahamed M.P., Managing director for global operations at Malabar Gold & Diamonds, said since gold has always been a preferred form of investment for majority of the people, the demand for the yellow metal will continue because of its appreciation value. This was down 27% on Q1 2016.

In value, the gold demand grew by 18 per cent in Q1 2017 to Rs 32,420 crore, against Rs 27,540 crore in Q1 2016, according to the WGC's "Q1 Gold Demand Trends" report. According to the WGC, demand from Chinese investors largely drove that increase - Chinese demand for gold bars and coins came in at 105.9 tonnes during the period, up 30 percent from the year-ago period. "Concerns over the weakness of the yuan and the outlook for the real estate market from the tail-end of last year spilled over into 2017; this combined with the usual seasonal strength around Chinese New Year and a rising gold price to support investor sentiment".

The total imports during January-March period rose by 112 per cent to 270.1 tonne from 127.4 tonne in Q1 2016. "But demand remains relatively weak in an historical context, 18 per cent below the 5-year quarterly average", the report said.

"Elsewhere the picture was less rosy: central bank demand was down and jewellery demand is still in the doldrums, although there are signs of improvement, especially from India where the gradual remonetisation of the economy is supporting the jewellery market". The estimated lower demand is attributed to the operational issues that the small jewellers, who account for two-thirds of India's gold industry, may face due to the roll out of GST. While mine production was "little changed" from Q1 2016, clocking in at 764 tonnes, overall supply sank 12 percent and came in at 1,032 tonnes. Both the gold spot price and gold funds, which specialise in buying mining businesses, are notoriously volatile.

Mine production of 764 t in the same period was little changed from 768 t in the corresponding three months of a year ago.

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