“Mixed Picture” For Gold As Demand Dropped 13% In Q1 – World Gold Council

Weak investor interest in gold meant total bullion demand dropped in quarter one, according to the World Gold Council (WGC).

Total yellow metal demand dropped 13% to 1,081 tonnes between January and March, the body said. It noted that “continued momentum in central bank buying and resurgent Chinese consumer demand contrasted with a negative contribution from [exchange-traded funds] and weakness in India.”

Central Bank Buying Rises

Buying from central banks experienced “significant growth” from the same period in 2022, those latest WGC numbers showed. Institutions snapped up 228 tonnes of gold in the first quarter, up 176% year on year.

Gold also benefitted from strong jewellery sales in China following the end of Covid-19 lockdowns. Consumers there bought 198 tonnes worth of jewellery in quarter one, up 11% year on year and representing the highest first-quarter total since 2015.

Chinese jewellery demand accounted for 41% of the global total in the quarter. The WGC said that “the recovering domestic economy and healthy income growth reignited domestic consumption, while the eye-catching gold price performance spurred investment interest.”

Investment Demand Sinks 51%

However, reduced investor buying pulled aggregate demand for the precious metal lower during quarter one.

Bar and coin investment rose 5% between January and March, to 302 tonnes. But this was more than offset by net negative demand across exchange-traded funds (ETFs).

Funds experienced total outflows of 29 tonnes in quarter one, a big departure from a year earlier when inflows of 271 tonnes were recorded. Consequently total gold investment plummeted 51% year on year to 274 tonnes.

Gold jewellery demand in India fell 17% in quarter one to just 78 tonnes. This was the worst first-quarter reading for three years, the WGC noted, as “record high – and volatile – domestic gold prices discouraged both investment and jewellery consumption during the quarter.”

Metal prices leapt rose 7% over the quarter as worries over high inflation, weak economic growth and a fresh banking crisis boosted demand for safe-haven assets. They have since built a base above $2,000 per ounce and could be poised for fresh record highs.

A Mixed Outlook

Despite those first-quarter declines, the WGC said that “we continue to see healthy upside for investment this year.”

It said that global gold ETF demand “is in need of a catalyst to see meaningful gains.” But the body added that “we expect positive demand and ETFs to retain significant upside potential from recession risk and waning interest rate headwinds.”

Meanwhile, bar and coin demand is tipped “to continue at a good pace” with positive sales in the US, South-East Asia and Middle East offsetting subdued demand in Europe and India.

The WGC said that it expects more “robust” central bank buying, too, albeit below 2022’s record-setting levels. Central banks bough 1,079 tonnes of the precious metal last year.

However, the organisation said that “the picture for fabrication (jewellery and technology) is more muted.” A slowdown in global growth is tipped to hit demand as the year progresses, with inventory drawdowns and weak consumer demand weighing on sales to the technology sector.