The surge in prices in 2019 saw gold demand fall 1%, spark a rise in recycling (and therefore supply) and triggered a slump in consumer interest and demand from some of the world’s major central banks as the year went on.
And, according to the latest report from the World Gold Council, the huge rise in investment flows into Exchange Trades Funds and similar products was matched by that price-driven slump in consumer demand for the metal – especially in India and China.
Gold averaged $US1,481 an oz in the 4th quarter. This was the highest average price since the March quarter of 2013.
Although the price remained below the Q3 high, it was well supported. And gold priced in various currencies – including euros, Indian rupees, the Australian dollar, and Turkish lira – hit their highest levels in history.
Gold was trading around $US1,577 an ounce on Thursday night, up around 5% from the 4th quarter. The driver has been the coronavirus crisis in China.
What that does to demand for gold in the world’s biggest market remains to be seen, but the longer it goes on, the more negative it will be for the metal and demand in 2020.
In its report for the 4th quarter and 2019, the World Gold Council (WGC) described last year as “broadly a year of two distinct halves: resilience/growth across most sectors in the first half of the year contrasted with widespread year on year declines in the second.”
Global demand in the second half of 2018 was down 10% on the same period of 2018, thanks to year on year falls in the December quarter compounded those from Q3, notably in jewelry demand and retail bar and coin investment.
Central bank demand also slowed sharply in the second half – down 38% in contrast with the 65% increase in the first six months of the year.
But this fall seems to have been the result of central bank appetites for gold having been met by the sheer scale of buying in the preceding few quarters.
In fact, central bank purchases reached a remarkable 650.3 tonnes in 2019 – the second-highest annual level for 50 years.
ETF investment inflows went again the weaker demand trend. Investment in these products held up strongly throughout the first nine months of the year, reaching a crescendo of 256.3 tonnes the September quarter before plunging 76% year on year to just 26.8 tonnes in the final three months of 2019.
That was a remarkable slide in demand and again shows that perhaps the strong demand in 2018 and into 2019 overwhelmed the appetite ETFs and their investors had for the metal by the closing months of the year.
The World Gold Council said demand from the technology sector fell modestly throughout the year, although electronics demand staged a minor recovery in the 4th quarter.
The annual supply of gold increased by 2% to 4,776.1 tonnes. This growth came purely from recycling and hedging, as mine production slipped 1% to 3,436.7t tonnes.
That was the first fall in annual production in a decade, according to the WGC.
