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World gold demand rose 4 percent in 2018, and the World Gold Council partially attributed the increase to the highest buying by central banks in decades, according to the Gold Demand Trends report.

The report states that central banks added 651.5 metric tons to official gold reserves in 2018, an increase of 74 percent from 374.8 metric tons in 2017 and the second highest annual total on record.

The 4 percent increase in demand also was attributed to a higher investment in gold bars and coins in the second half of the year.

Gold demand in 2018 was at 4,345.1 metric tons, which the report states is in line with the five-year average demand of 4,347.5 metric tons.

“Gold demand rose in 2018 and, although the U.S. dollar gold price was down 1 percent over the year, it outperformed many other financial assets,” said Alistar Hewitt, head of market intelligence for the World Gold Council.

“Worries about a slowdown in global growth, heightened geopolitical tensions and financial volatility saw central bank demand hit its highest level since Nixon closed the gold window in 1971, the volume of gold in European-listed ETFs (exchange-traded funds) reach a record high, and annual gold coin demand leap 26 percent,” he said.

Hewitt also stated in the release of the Gold Demand Trends report that “some of these factors may prove to be headwinds for some parts of the market. Jewelry and technology demand slowed in Q4 as consumer confidence waned in many markets.”

He said he didn’t “see any of the risks that investors and central banks are worried about fading anytime soon, and I expect gold to remain an attractive hedge in 2019.”

Annual jewelry demand held steady in 2018 at 2,200 metric tons, down one ton from 2017, according to the Gold Demand Trends report put out by the World Gold Council on Jan. 31. A gain of 3 percent in China, 4 percent in the United States and 9 percent in Russia offset sharp losses in the Middle East. Demand in the Middle East fell 15 percent from 2017.

Demand for gold jewelry was stable at 589 metric tons, down 4 tons from 2017.

Exchange-traded funds and similar products saw only moderate inflows in 2018, the report states. The inflows totaled 68.9 metric tons, down 67 percent from 2017, although there was a recovery in the last quarter of the year due to stock market volatility and signs of faltering economic growth in key markets.

In the fourth quarter, inflows grew to 112.5 metric tons, compared with 32.5 tons in 2017. Europe was the only region to see net growth over the whole year, the report states.

Retail investment in gold bars and coins rose 4 percent in 2018 to 1,090.2 metric tons. Coin demand jumped to a five-year high of 236.4 metric tons, the second highest on record, according to the report. Demand for gold bars, however, held steady at 781.6 metric tons. This was the fifth year in succession of gold-bar demand in the range of 780 to 800 tons.

The report also stated that there were marginal gains in the volume of gold used in technology, up 1 percent over 2017, although there was a slowdown in the fourth quarter.

After healthy gains in the first three quarters of 2018, the slowdown of sales of smartphones, the trade war between the U.S. and China, and mounting uncertainty over global economic growth led to the 5 percent drop in the fourth quarter to 84.1 metric tons, Gold Demand Trends reported.

The total supply of gold grew by 1 percent in 2018, up from 4,447.2 metric tons to 4,490.2 metric tons in 2017. The report stated that the growth was supported by similar year-to-year increases in mine production and recycled gold. Recycling was up 1 percent to 1,172.6 metric tons, compared with 1,156.1 tons in 2017.

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