(Kitco News) - It was a Tale of Two Cities for the gold market in 2019: it was the best of times and it was the worst of times, according to year-end data published by the World Gold Council (WGC)
The WGC’s fourth-quarter and full-year demands trend report showed that gold demand in 2019 declined by 1% to 4,335 tons. While investment demand rose to record levels last year, physical demand sharply declined to a nearly 10-year low due to the yellow metal’s biggest price rise in 10 years.
“The gold price rallied to a six-year high in US dollar terms and hit record levels in a range of other currencies – euro, Indian rupee, Turkish lira and South African rand among them. This price strength had clear implications for gold demand across all sectors,” the WGC said in its report.
Although overall gold demand declined last year, in a telephone interview with Kitco News, Juan Carlos Artigas, director of investment research at the WGC, said that it is clear that gold is top of mind for investors as uncertainty continues to dominate financial markets.
Physical gold demand was led by insatiable investor interest as gold holdings in exchange-traded products hit record highs last year. While holding peaked in the third quarter, the WGC said that holding for the year increased by 400 tons to 2885.5 tons.
“2019 marked a year that showed how gold can benefit investors during times of uncertainty,” he said.
But it wasn’t just retail investors taking renewed interest in gold. Central Banks continued to be net buyers of gold. The final results of the year showed that 15 central banks bought 650.30 tons of gold in 2019, just missing 2018’s record of 656.2 tons.
The WGC noted that 2019 marked the tenth year central banks were net buyers a gold, fully reversing the previous decade of net selling.
“The fundamental change in mindset towards gold has resulted in significant and, importantly, sustained levels of demand. During this time, central banks have added 5,019t back to global official gold reserves, with an annual average of around 500t, compared with average annual net sales of 443t in the preceding decade,” the WGC said.
However, despite strong investment and central bank interest in gold last year, it wasn’t enough to compensate for significant declines in gold jewelry and coin and bar sales last year.
The WGC said that global gold jewelry demand fell by 6% last year to 2,107 tons. The fourth quarter alone saw a 10% declined compared to the fourth quarter of 2018.
However, the WGC also noted that price was the biggest factor in jewelry demand as the value spent in the sector rose 3% to a five-year high.
Physical demand for bullion coins and bars told a similar story as demand fell to its lowest levels in 10 years.
“The drop off in investment was mostly a reaction to the price rally and higher price volatility with added pressure coming from a slowdown in the domestic economies of both countries,” the WGC said.
Although consumer demand was soft through 2019, Artigas said that it wouldn’t take much to bring buyers back to the marketplace.
“We will see stronger consumer demand if there is a little more confidence in global economic growth and a consistency in the gold price,” he said. “Consumers are comfortable paying higher prices for gold if they expect that prices will continue to rise.”
Although investment demand is pumping much-needed momentum into the gold market, Artigas said that physical consumer demand has the largest impact on long-term prices.
Gold supply increases in 2019
While consumers weren’t actively buying gold last year, they were certainly selling it. The WGC said that global gold supply increased by 2% in 2019 mostly because of a sharp increase in recycling. The total gold supply last year rose to 4,776.1 tons.
The report said that recycled gold supply increased 11% for the year to 1,304.1 tons.
Meanwhile, mine production declined by 1% 3,463.7 tons. The fourth quarter was a particularly slow period for gold producers. The WGC said that fourth quarter gold production dropped 2% to 889.5 tons, compared to the fourth quarter of 2018.
“This was the lowest level of Q4 mine output since Q4’16,” the report said.
2020-01-30 05:48:39Z
https://www.kitco.com/news/2020-01-30/Global-gold-demand-fell-1-in-2019-despite-record-investor-buying-World-Gold-Council.html
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