Q1 2017 Gold Demand Trends

The World Gold Council last week released their first quarter Gold Demand Trends report for 2017.  Q1 saw demand of 1,035 tonne which, whilst still historically strong, was down 18% on the all time record quarter of Q1 2016.  Below is a summary..

ETF’s – when comparing to that extraordinary Q1 2016, the 109 tonne of inflows into ETF’s we saw this year was just one third that seen in the rush to safe haven investments in that period when investors were worried the sharemarket was about to collapse.  The Fed had just put up rates and the wobbles were in.  Maybe that will be the case in July after a June hike?

Investment Bullion – countering that lower ‘paper gold’ ETF number we saw increased demand in bullion (290 tonne), up 9% and lead strongly by China which saw retail investment surging by 30% to over 100 tonne, the 4th biggest on record.  India too was up 14% to 31.2 tonne.

Jewellery – was up slightly to 481 tonne, supported largely by an increase in India.  

Central Banks – whilst remaining net buyers (maintaining the record streak since the GFC), central bank net purchases dropped 27% to 76 tonne but retained little appetite to sell.

Technology – bucking the trend, technology demand actually increased 3% to 78.5 tonne, dominated by electronics and boosted by the trend to wireless mobile phone charging.

Supply – Total supply contracted sharply, down 12% to 1,032 tonne lead by a 21% fall in recycling whilst mine supply remained essentially unchanged at 764 tonne.  Recycling is very price dependent and Q1 2016’s high prices saw strong recycling sales.

China, the world’s biggest producer (by far), saw a 9.3% drop in supply to 101 tonne whilst consumption jumped 14.7%.  Interestingly their central bank stopped their reported accumulation in October 2016.  Very few analysts believe their reported figures regardless, with general consensus that they have far more gold held in other agency accounts.

Apart from China stepping up strongly to the table again, it was a welcome return of India as well.  With strong gains in both investment bullion and jewellery, India saw its strongest quarter since 2014 at 270 tonne, double that of Q1 last year.  2016 saw the worst Indian demand in 7 years amid the government’s financial system crackdown.