Global demand for gold grew to 1,053.3 tonnes in Q1, up 7 per cent year-on-year, according to the latest report by the World Gold Council (WGC). A big reason for the stronger demand is central banks, which continued to buy gold for diversification and liquidity purposes. Another is improvement in the India market.
Central banks around the world bought 145.5 tonnes of gold this quarter, the largest increase in global reserves since 2013 (179.1 tonnes). The buying volume also comfortably exceeded the five-year quarterly average of 129.2 tonnes.
An uptick in demand for gold jewellery also contributed to the stronger Q1 gold demand. Much of this growth came from India, the world’s second-biggest gold consumer, where a lower rupee gold price in late February/early March coincided with the traditional gold-buying wedding season to lift jewellery demand up to 125.4 tonnes, the highest since Q1 2015.
This could continue on heading into the second quarter. The Hindu calendar shows 37 auspicious dates for weddings in Q2, compared with just 21 in the second quarter a year earlier. Indians will also celebrate Akshaya Tritiya on May 7, when buying gold is considered auspicious.
“Prices are attractive. In the second quarter we might see a surge in demand due to Akshaya Tritiya and higher auspicious days for weddings,” said Somasundaram PR, the managing director of WGC’s Indian operations.
The overall demand stood at 984.2 tonnes in the first quarter of 2018, according to the WGC’s Q1 Gold Demand Trends report. Purchase of gold by central banks went up by 68 per cent to 145.5 tonnes during the first quarter of this year compared to 86.7 tonnes in the same period of 2018, representing the strongest start to a year since 2013.
“The central bank buying gold was led by Russia, which added 55.3 tonnes, while China also made a come back by buying 33 tonnes. Even the Reserve Bank of India bought a small amount of 8.4 tonnes during the period,” WGC managing director, India, Somasundaram PR revealed. The was mainly due to diversification and a desire for safe, liquid assets.
“The beginning of 2019 saw a sharp recovery in investors sentiment in both the equity and debt markets, but appetite for gold remained solid. In the first quarter, central banks continued to increase their holdings of gold, while ETFs also saw an increase in inflows compared with the first quarter of 2018,” WGC Head of Market Intelligence Alistair Hewitt said.
Total investment demand was up 3 per cent during the quarter at 298.1 tonnes, compared with 288.4 tonnes in the same quarter of 2018. ETFs and similar products added 40.3 tonne during January-March period, up 49 per cent on last year, aided by geopolitical tensions in Europe and growing doubts over the health of the US economy. Bar and coin investment softened slightly by 1 per cent to 257.8 tonnes due to a fall in demand for gold bars, as official gold coin buying grew 12 per cent to 56.1 tonnes. This was mainly due to drop in Chinese demand and disinvestment in Japan.