Gold demand up 7 pc to 1,053 tonnes, India's gold jewellery demand highest since 2015

Global gold demand grew to 1,053.3 tonnes in the first quarter of 2019, up by seven per cent as compared to the last corresponding period, the World Gold Council (WGC) said on Thursday.

The increase was largely due to continued growth in central bank buying as well as growth in gold-backed exchange traded funds (ETFs), WGC said in its latest report on gold demand trends.

India's demand for gold jewellery hit a four-year high during January to March.

"A lower local rupee gold price in late February and early March coincided with the traditional gold buying wedding season, lifting jewellery demand to 125.4 tonnes, a 5 per cent increase on the same period last year and the highest Q1 since 2015."

This helped the overall gold demand for jewellery at global level inch nearly one per cent higher to 530.3 tonnes despite two per cent decline in China's demand for gold jewellery estimated at 184.1 tonnes, said WGC.

Central banks bought 145.5 tonnes of gold in Q1, up 68 per cent as compared to the corresponding period in 2018 and representing the strongest start to a year since 2013. Diversification and a desire for safe, liquid assets were again the main drivers of the purchases.

On a rolling four-quarter basis, gold buying reached a record high for our series of 715.7 tonnes, said the WGC.

ETFs and similar products added 40.3 tonnes in Q1, up 49 per cent on last year. Funds listed in the United States and Europe benefitted from the largest inflows, although the former was more erratic while the latter was underpinned by continued geopolitical instability.

Bar and coin investment softened slightly, down one per cent to 257.8 tonnes. This was purely due to a fall in demand for gold bars, as official gold coin buying grew 12 per cent to 56.1 tonnes. China and Japan were the main contributors to the decline.

In Japan, net investment turned negative on profit-taking following a surge in the local price in February.

Gold used in applications such as electronics, wireless and LED lighting fell three per cent to 79.3 tonnes. Trade frictions, sluggish sales of consumer electronics and global economic headwinds hit the technology sector.

"The beginning of 2019 saw a sharp recovery in investor sentiment in both the equity and debt markets, but appetite for gold remained solid," said Alistair Hewitt, WGC's Head of Market Intelligence.

The total supply of gold was largely unchanged in Q1 at 1,150 tonnes. Modest growth in mine production and recycling was offset by a decline in net hedging.

Mine production and recycling levels saw small increases compared with Q1 2018, rising to 852.4 tonnes and 287.6 tonnes, said WGC in a statement.