On April 29, the World Gold Council released its first quarter Gold demand trend report (hereinafter referred to as "the report"). Total global gold demand (excluding over-the-counter trading) fell 23 per cent to 815.7 tonnes in the first quarter from a year earlier, while demand for gold jewellery in the Chinese market surged 212 per cent year-on-year, according to the report.
The total global demand for gold is declining compared with the same period last year.
According to the report, total global gold demand in the first quarter of 2021 was 815.7 tons, basically the same as in the previous quarter, but down 23% from the same period last year, mainly due to a net outflow of 177.9 tons of gold ETF.
The report pointed out that due to the rapid rise in expectations of rising interest rates, a large outflow of gold ETF positions affected market interest in gold, resulting in a decline in gold investment demand in the first quarter. At the same time, it also exacerbated the decline in the price of dollar gold in the first quarter, which has fallen by 10% in the past quarter.
At the same time, China's gold ETF positions had a net inflow of 11.5t in the first quarter, with the total domestic position reaching 72.4t by the end of March, a record high. Its total asset management also reached 25.9 billion yuan, the second highest in history.
Strong recovery in retail demand for gold bars, gold coins and gold
Global investment in gold bars and coins reached 339.5 tonnes, up 36 per cent from a year earlier, affected by bargain buying and expectations of inflationary pressures, according to the report. Among them, the total demand for gold bars and coins in the Chinese market was 86 tons, reaching the highest level in 10 quarters, an increase of 133% over the same period last year.
Although one of the main reasons behind the increase was last year's low base, total sales of 191.1 tonnes of gold jewellery still increased by 4 per cent compared with the same period in 2019 before the outbreak.
Wang Lixin pointed out that the first reason is that China's economy continues to pick up, with GDP surging 18.3% year-on-year in the first quarter, the highest level since records began. And there is also a sharp increase of 10.3% compared with the first quarter of 2019 before the outbreak. Second, the price of Au9999 gold, the benchmark for domestic gold prices, fell 8.5% in the first quarter, further boosting the purchasing power of Chinese consumers. Referring to the price of gold against the backdrop of inflation expectations, Wang Lixin said that from historical data, the scale of investment demand for gold will rise in times of high inflation, thus affecting the price of gold. But gold prices are generally affected only when inflation exceeds 2.5%. He stressed that gold is not a raw material for production and will not rise as quickly as commodities do with economic recovery and inflation expectations.
