By Anil Mathews (ScrapMonster Author)
May 13, 2016 08:05:31 AM
NEW DELHI (Scrap Monster): The demand for gold surged higher significantly during the first quarter of the current year, says Gold Demand Trends Report for Q1 2016 released by the World Gold Council (WGC). The demand climbed higher by 21% to 1,289.8 tonnes during the initial three-month period of the year from January to March, mainly driven by negative interest rates, slowdown in global economic growth and fall in global stock markets.
According to WGC, the inflows into Exchange-Traded Funds (ETFs) reached seven-year highs during the quarter. The inflows of 363.7 tonnes were the highest since Q1 2009 and were nearer to record levels reached during the time of global recession. Inflows from both institutional and private investors remained robust during the quarter. Interestingly, the flows were not restricted to dominant Western markets. The Chinese gold-backed ETFs attracted inflows of 11.1 tonnes during the quarter. The volume of gold held by Chinese ETF products more than doubled during the quarter. Incidentally, Huaan Yifu Gold ETF emerged the winner with total gold holdings rising to 13.5 tonnes, significantly higher when compared with 10.3 tonnes at the end of 2015.
The US investor demand in gold jumped higher by 55% in Q1 2016 when compared with the same quarter a year before. The European gold investment demand too remained robust at 58.4 tonnes, backed by strong German demand. Bar and coin demand in the UK grew by 61%. The resilient gold prices and New Year festive purchasing led to increased demand for bars and coins in China. The Chinese demand rose by 5% to 61.9 tonnes. However, sharp rally in gold prices resulted in lesser demand for bars and coins in the Middle East and other Asian markets. The investment demand in India slumped during the quarter. The bar and coin demand in the country plunged to seven-year lows at 28 tonnes.
The global jewellery demand fell 19% year-on-year to 481.9 tonnes.
The Indian gold jewellery demand tumbled during the quarter, mainly on the back of high gold prices. The demand during the month of March reached nearly zero, on account of jewellers strike in protest against government’s decision to impose 1% excise tax on jewellery manufacturing. The quarterly demand of 88.4 tonnes was the lowest since Q1 2009. The country’s jewellery demand dropped sharply by 41% when compared with Q1 2015. The domestic market in the country moved to a discount to international gold price. The discount widened during the month of March. Meantime, expectation of above-normal monsoon season in the country is likely to raise rural incomes, thereby lifting gold demand in the quarters to come by.
Meantime, the demand for gold jewellery in the US was up by 2% year-on-year during Q1 2016. Middle Eastern markets witnessed significant drop in jewllery demand. Egypt’s demand dropped sharply by 18% year-on-year to 7.7 tonnes, whereas Turkish demand too was down by 18% to 8.5 tonnes. Iran was the only exception with 10% growth in jewellery demand during the quarter. The European gold jewellery demand remained more or less steady during the quarter.
Gold jewellery demand in China during the first quarter of 2016 totaled 179.4 tonnes, considerably lower by 17% when compared with 216.3 tonnes in the same period of 2015. Sharply rising gold prices and continued economic slowdown in the country dented the appetite for gold jewellery in the country, said WGC report.