Global gold demand reached 4,345.1 tonnes (t) in 2018, up 4% on 2017 and in line with five-year average demand of 4,347.5t, according to the World Gold Council’s latest Gold Demand Trends report.
The annual increase was driven by a multi-decade high in central bank buying and accelerated investment in bars and coins during the second half of the year. While annual inflows into exchange-traded funds (ETFs) were down 67% in 2018, demand was boosted in the final quarter by inflows of 112.4t.
Central banks added 651.5t to official gold reserves in 2018, up 74% on 2017 and the second highest yearly total on record. Net purchases jumped to their highest level since the end of US dollar convertibility into gold in 1971, as a greater pool of central banks turned to gold as a diversifier.
Annual jewellery demand was steady at 2,200t, down just 1t from the previous year. Gains in China (3%), the US (4%) and Russia (9%) broadly offset sharp losses in the Middle East, where demand dropped 15% on 2017. Indian demand was stable at 598t, a drop of only 4t from the previous year.
ETFs and similar products saw only moderate inflows of 68.9t during 2018, down 67% on 2017. Stock market volatility and signs of faltering economic growth in key markets fuelled a recovery in Q4 2018, with inflows growing to 112.4t from 32.5t in the same period last year. However, Europe was the only region to see net growth over the year as a whole.
Retail investment in gold bars and coins grew 4% in 2018, to 1,090.2t. Coin demand surged to reach a five-year high of 236.4t, the second-highest on record. Demand for gold bars held steady at 781.6t, the fifth year in succession of holding in a firm 780-800t range.
2018 saw marginal gains in the volume of gold used in technology, up 1% year-on-year, although this was tempered by a Q4 slowdown. After healthy gains during the first three quarters of 2018, a combination of slowing smartphone sales, the US-China trade war and mounting uncertainty over global economic growth contributed to a 5% decline in Q4, to 84.1t.
Alistair Hewitt, Head of Market Intelligence at the World Gold Council, commented, “Gold demand rose in 2018 and, although the US dollar gold price was down 1% over the year, it outperformed many other financial assets. Worries about a slowdown in global growth, heightened geopolitical tensions, and financial market volatility saw central bank demand hit its highest level since Nixon closed the gold window in 1971, the volume of gold in European-listed ETFs reach a record high, and annual coin demand leap 26%.”
The total supply of gold grew marginally by 1% in 2018, up from 4,447.2t to 4,490.2t. This growth was supported by similar year-on-year increases in mine production – to a new record high – and recycled gold.