Q1 2014 gold demand shows core fundamentals remain robust

Following an exceptional year in 2013 Gold demand in Q1 2014 was 1,074 tonnes (t), almost unchanged compared to the same period in 2013 - a clear demonstration that the fundamentals of the gold market remain robust.

Global demand for jewellery, the most significant component of overall demand, totalled 571t in Q1 2014, a 3% rise on the same period last year, representing the strongest start to the year for jewellery since 2005. Most notably, there was a 10% rise in demand for jewellery in China, which became the largest global market for gold demand in 2013.

Central banks continued to be strong buyers, purchasing 122t in the quarter. While this represents a fall of 6% compared to Q1 2013, it is the 13th consecutive quarter in which central banks have been net purchasers of gold and indicates their continued commitment to diversifying their assets.

Overall investment demand dipped slightly, to 282t in Q1 2014, compared with 288t in the same quarter last year. Demand for bars and coins was 283t in the quarter, a fall of 39% on the same time last year. This coincided with the first rise in the quarterly average gold price seen since Q4 2012. The fall was particularly noticeable in India, where investment in bars and coins dropped 54% to 45t.   Factors including duty and restrictions on gold imports coupled with restrictions on the free movement of cash and other assets, such as gold in the run up to the election, had the effect of dampening down genuine purchases of gold using cash. However in contrast, outflows from gold-backed Exchange Traded Funds (ETFs) slowed to just 0.2t, compared to the more substantial fall of 177t seen in Q1 2013.

Consumer demand of 853t was unsurprisingly lower than the figures seen throughout much of 2013, when buyers took advantage of the lower gold price and drove consumer demand to record levels.  Q1 2014 data indicates a return to long term average demand trends and is in line with the 5-year quarterly average of 850t.

Marcus Grubb, Managing Director, Investment Strategy, at the World Gold Council, said: “Following an exceptional year in 2013, Quarter 1 2014 signals a return to the long term average patterns of demand, holding steady at 1,074 tonnes.  It is clear that the longer term underpinnings of the gold market – such as jewellery demand in Asia – remain firmly in place demonstrating the continuing resilience of the gold market and the unique nature of gold as an asset class, rebalancing to reflect demand.” 

In value terms, gold demand in Q1 2014 was US$45bn, down 21% compared to Q1 2013. The average gold price of US$1,293/oz was down 21% on the average Q1 2013 price.

The key findings from the report are as follows:

·         Total global jewellery demand was 571t in the first quarter, a rise of 3% on the same quarter last year, as consumers continued to be the dominant drivers of the demand for gold.

·         Total investment demand was 282t, compared to 288t in the same quarter the previous year. Demand for bars and coins fell 39% from the previous year to 283t. However this coincided with the first rise in the quarterly average gold price seen since Q4 2012, which encouraged private investors to wait for clearer signs about the longer term path of the price of gold before deciding on their investment strategy.

·         ETF outflows were just 0.2t, a fraction of the outflows seen in Q1 2013.

·         Q1 2014 saw central bank net purchases again top 100t. This is the 13th consecutive quarter in which central banks have been net purchasers as they diversify their assets. Central bank net purchases were 122t in Q1 2014, 6% lower than a year ago.

·         Taken together, the figures demonstrate that the core fundamentals of the market remain in place following an exceptional 2013.

Gold demand and supply statistics for Q1 2014

·         Q1 gold demand of 1,074t was fractionally lower than the 1,077t seen in Q1 2013

·         ETF outflows slowed to just 0.2t. With demand for bars and coins totalling 283t, this means overall investment demand was 282t, a 2% fall on Q1 2013

·         Demand in the jewellery sector was up 3% to 571t. Jewellery demand in China was up 10% to 203t, while demand in India fell 9% to 146t

·         Demand in the technology sector was 99t for the quarter, down 4% compared to the previous year

·         Q1 2014 mine production was up 6% on last year at 721t. Recycling fell 13% resulting in total gold supply that was 1% higher than a year ago at 1,048t

·         Net central bank purchases totalled 122t, 6% lower than a year ago, making this the 13th consecutive quarter in which central banks have been net purchasers of gold

·         Gold demand in value terms in Q1 2014 was US$45bn, down 21% on last year

·         The Q1 2014 average gold price was US$1,293/oz, down 21% on the year before