LONDON: Surging inflows into gold-backed exchange-traded funds drove global gold demand to its highest first-quarter total on record this year, despite a near 20 percent drop in jewelry buying, the World Gold Council has said.
Demand hit 1,290 tons in the period, the WGC said in its latest Gold Demand Trends report, the best first quarter and second strongest quarter overall since its data series began.
Investment in products like ETFs, coins and bars more than doubled to 618 tons, accounting for 28 percent of the total. That helped fuel a 16 percent surge in gold prices in the period, its biggest quarterly rise in nearly 30 years.
"Two major themes emerged in the first quarter of 2016. Spurred on by the uncertainty raised by negative interest rates, the investment sector was the dominant driver of gold demand," the WGC's head of market intelligence Alistair Hewitt said.
"Conversely, jewelry demand endured a difficult quarter due to a continued lack of consumer confidence in the face of a weakening Chinese economy and a 42-day strike by jewelers in India." jewelry buying, the largest demand segment, fell as Chinese jewelry consumption slid 17 percent to 179 tons, hit by higher gold prices.
Bar and coin demand in China rose 5 percent, however, while Indian buying fell 31 percent. India's jewelry offtake slid 41 percent to a seven-year low, after a strike among Indian jewelers in March. Few counties saw much of an increase in jewelry buying, though it rose 10 percent in Iran after the lifting of Western sanctions.
Central banks remained gold buyers for a 21st straight quarter, with China and Russia driving purchases of a total 109.4 tons of gold. That is its weakest quarter since the last three months of 2013, however.
On the supply side of the market, increased hedging — which roughly translates as producers selling output forward to lock in prices — and a slight rise in mine supply pushed up overall output by 5 percent, despite lower recycling.
Demand hit 1,290 tons in the period, the WGC said in its latest Gold Demand Trends report, the best first quarter and second strongest quarter overall since its data series began.
Investment in products like ETFs, coins and bars more than doubled to 618 tons, accounting for 28 percent of the total. That helped fuel a 16 percent surge in gold prices in the period, its biggest quarterly rise in nearly 30 years.
"Two major themes emerged in the first quarter of 2016. Spurred on by the uncertainty raised by negative interest rates, the investment sector was the dominant driver of gold demand," the WGC's head of market intelligence Alistair Hewitt said.
"Conversely, jewelry demand endured a difficult quarter due to a continued lack of consumer confidence in the face of a weakening Chinese economy and a 42-day strike by jewelers in India." jewelry buying, the largest demand segment, fell as Chinese jewelry consumption slid 17 percent to 179 tons, hit by higher gold prices.
Bar and coin demand in China rose 5 percent, however, while Indian buying fell 31 percent. India's jewelry offtake slid 41 percent to a seven-year low, after a strike among Indian jewelers in March. Few counties saw much of an increase in jewelry buying, though it rose 10 percent in Iran after the lifting of Western sanctions.
Central banks remained gold buyers for a 21st straight quarter, with China and Russia driving purchases of a total 109.4 tons of gold. That is its weakest quarter since the last three months of 2013, however.
On the supply side of the market, increased hedging — which roughly translates as producers selling output forward to lock in prices — and a slight rise in mine supply pushed up overall output by 5 percent, despite lower recycling.
