According to industry body the World Gold Council’s (WGC's) Gold Demand Trends report for the first quarter, continued momentum in central bank buying and resurgent Chinese consumer demand contrasted with a negative contribution from exchange-traded funds (ETFs) and weakness in India during the period.
First-quarter gold demand (excluding over-the-counter, or OTC) was 13% lower year-on-year, at 1 081 t.
Inclusive of OTC, total gold demand strengthened 1% year-on-year, to 1 174 t, as a recovery in OTC investment – consistent with investor positioning in the futures market – offset weaknesses in some areas.
The report says that demand from central banks experienced considerable growth in the period.
Official sector institutions remained keen and committed buyers of gold, adding 228 t to global reserves, it outlines.
Bar and coin investment gained 5% year-on-year to 302 t, concealing some large regional variations, the report states.
It notes that, in contrast, net negative demand for ETFs, although modest at -29 t, generated a considerable year-on-year decline compared with the sizable inflows seen in the first quarter of 2022.
According to the report, global jewellery consumption was virtually flat at 478 t. Jewellery fabrication exceeded consumption as stock building added just over 30 t to global inventories.
Also, gold use in the technology sector continued to suffer from the challenging economic climate, the report indicates.
Demand slumped to 70 t – the second lowest quarter in the Council’s data series back to 2000.
There was modest growth in both mine production (+2%) and recycling (+5%), which led to a marginal increase in first-quarter total gold supply to 1 174 t.
The uptick in recycling was largely a function of higher gold prices, the report indicates.
The London Bullion Market Association gold price averaged $1 890/oz during the first quarter, marginally higher year-on-year.
The price was over 10% higher than the previous quarter’s average, almost matching the third quarter 2020 record high.
The report indicates that China saw a strong relief rally in the first post-Covid-19 quarter of unfettered consumer spending.
In China, the recovering domestic economy and healthy income growth reignited domestic consumption, while the appealing gold price performance spurred investment interest.
According to the report, Indian demand fell sharply, owing to local gold prices.
In India, record high – and volatile – domestic gold prices discouraged both investment and jewellery consumption during the quarter, the report shows.
The report highlights that investment dominates the outlook for this year.
The WGC says it continues to see healthy upside for investment this year, while the picture for fabrication (jewellery and technology) is more muted.
Further robust central bank buying is expected, albeit below the record in 2022. Modest growth is likely in both mine production and recycling, the report indicates.