Global gold demand falls in worst Q1 show since 2008

Mumbai: Worldwide demand for gold fell to 973 tonnes in the January-March period, the lowest in any first quarter since 2008, due to weak interest in gold bars and gold-backed exchange-traded funds (ETFs).

Global jewellery demand was roughly flat at 488 tonnes, down 1% from a year ago, figures released by the World Gold Council (WGC) showed on Thursday. Demand in China was buoyed by holiday demand and the US demand continued to improve in response to the supportive economic backdrop.

In contrast, Indian buyers were discouraged by rising gold prices, worsened by a weakening rupee, as demand fell 12% from a year ago to 87.7 tonnes. The rupee fell 2% against the US dollar in the March quarter, the biggest decline since the quarter ended September 2015.

“A substantial drop in the number of auspicious wedding days during the period, compared with the first quarter of 2017, could be a factor for muted demand,” Somasundaram P.R., managing director (MD), WGC’s India unit said.

“Imports were also down 50% year-on-year, in anticipation of an import duty cut in the Union budget that did not materialize,” he added.

Somasundaram said WGC’s full-year India demand forecast for 2018 is 700 to 800 tonnes, compared with the 2017 demand of 738 tonnes.

China, Germany and the US led weakness in bar and coin investment. Global demand was down 15% to 254.9 tonnes. The range-bound gold price checked investor interest in these markets.

China’s weakness was partly also because of exceptional strength in the first quarter of 2017.

ETFs saw their fifth consecutive quarter of inflows and holdings grew by 32 tonnes, because of growth solely in North America. Investment in the first quarter was mixed, with rising interest rates on the one hand and a spike in stock market volatility on the other. As gold prices were relatively subdued, many investors lacked a clear signal, WGC said.

Central banks added 116 tonnes to global official reserves in first quarter of 2018. This was the highest first quarter total for four years and in line with average quarterly purchases since the first quarter of 2010 of 115 tonnes.

Russia, Turkey and Kazakhstan again dominated the list of central banks buying gold, adding 91 tonnes between them.livemint