Global gold demand up 7% in Q1; gold jewellery demand in India at 4-yr high

India's demand for gold jewellery hit a four-year high in Q1CY19 at 125.4 tonnes. This, WGC said, helped the overall gold demand for jewellery at the global level inch nearly 1% higher to 530.3 tonnes

The overall demand for gold at the global level surged 7 per cent to 1,053.3 tonnes, led by buying by central banks and exchange traded funds (ETFs), says the latest report on gold demand trends for the first quarter of calendar year 2019 (Q1CY19) by World Gold Council (WGC).

Central banks bought 145.5 tonnes of gold, the largest Q1 increase in global reserves since 2013. “Diversification and a desire for safe, liquid assets were the main drivers of buying here. On a rolling four-quarter basis, gold buying reached a record high for our data series of 715.7 tonnes,” the WGC report said.

India’s demand for gold jewellery hit a four-year high in Q1CY19 at 125.4 tonnes. This, WGC said, helped the overall gold demand for jewellery at the global level inch nearly one per cent higher to 530.3 tonnes, worth $22.2 billion during the recent concluded quarter despite a 2 per cent decline in China’s demand for gold jewellery, estimated at 184.1 tonnes.

“A lower rupee gold price in late February/early March coincided with the traditional gold-buying wedding season, lifting jewellery demand in India to 125.4t up 5 per cent year-on-year – the highest Q1 since 2015,” the WGC report says.

The first half of the quarter, according to WGC, was subdued. The month-long inauspicious period of Kharmas / Malmas ended in mid-January and was followed by a sharp rise in the local gold price, hitting Rs 33,730 per 10 gram by the third week of February 1. Prices then slipped to Rs 32,000 per 10 gram by the first week of March. This price correction, WGC believes, got consumers rush to make wedding-related buying.

At the global level, though the demand in the US continued to expand, the pace of growth slowed as the prolonged government shutdown hit demand in January. The demand in Middle East, which was hit by the introduction of value added tax (VAT) in the UAE and Saudi Arabia in Q1CY18, saw an improvement in the recently concluded quarter. Iran was a notable exception where the demand slipped 10 per cent.

INVESTMENT DEMAND

Gold bar and coin demand surged 3 per cent at the global level, rising to 298.1 tonnes in the recently concluded quarter as compared to 288.4 tonnes in Q1CY18. This again was led by demand in India, which surged 4 per cent to 33.6 tonnes in Q1CY19, as compared to 32.3 tonnes in the previous corresponding period. 

Demand from China, however, dipped 8 per cent to 71.2 tonnes. Investors globally added 40.3 tonnes to gold-backed ETF holdings in Q1, as compared to 27.1 tonnes in Q1CY18 - an increase of 49 per cent y-o-y.

"Despite US stock markets generating their strongest quarterly returns in ten years, investor sentiment in Q1 was underpinned by the shifting stance of the Federal Reserve, which adopted a more neutral monetary policy approach. The concurrent shift in market expectations – from a predicted scenario of US rate rises to one in which rates stay unchanged over the remainder of this year – supported demand for gold-backed ETFs," the WGC report says.

The volume of gold used in technology dipped to a two-year low of 79.3 tonnes, hit by slower economic growth. The supply of gold in Q1, on the other hand stood at 1,150 tonnes a modest fall of 3 tonnes on y-o-y basis.

Gold demand (Tonnes)
—	Q1'18	Q1'19	YoY change (%)
JEWELLERY	527.3	530.3	0.6
TECHNOLOGY	81.8	79.3	-3.0
Electronics	65.3	62.9	-3.7
Other Industrial	12.5	12.9	3.2
Dentistry	4.0	3.6	-10.6
INVESTMENT	288.4	298.1	3.4
Total bar and coin demand	261.3	257.8	-1.4
Physical Bar demand	195.6	185.4	-5.2
Official Coin	50.2	56.1	11.7
Medals/Imitation Coin	15.5	16.2	4.5
ETFs & similar products	27.1	40.3	48.8
CENTRAL BANKS & OTHER INST.	86.7	145.5	67.9
GOLD DEMAND	984.2	1053.3	7.0
LBMA Gold Price, US$/oz	1329.3	1303.8	-1.9

Source: World Gold Council report