Gold demand was 4,355.7 metric tons in 2019, down 1% from 4,401 metric tons in 2018, according to the latest Gold Demand Trends report from the World Gold Council. Most sectors of the market saw resilience and growth in the first half of 2019 but widespread weakness in the second half.
Worldwide, the annual supply of gold rose 2% to 4,776 metric tons in 2019, but this growth was from recycling and hedging, while mine production slipped 1% to 3,436 metric tons in 2019.
The London-based World Gold Council also provided a gold outlook for 2020 that states the council expects that the interplay between market risk and economic growth will drive gold demand this year, with the focus on financial uncertainty and lower interest rates, weakening global economic growth and gold price volatility.
The outlook states the World Gold Council expects “that many of the global dynamics seeded over the past few years will remain generally supportive for gold in 2020.”
The gold price averaged $1,481 per ounce in the fourth quarter of 2019, the highest quarterly average since the first quarter of 2013, although the price remained below the high hit in the third quarter of $1,550 per ounce.
The gold outlook says that gold in 2019 had its best performance since 2010, rising by 18.4% in U.S. dollars, and outperformed major global bond and emerging market stock benchmarks in that time.
According to the trends report, central bank demand dropped 38% in the second half, in contrast to a 65% increase in the first six months of last year, but the report stated this was partly due to “the sheer scale of buying” that had been seen in the preceding few quarters.
Central banks were net buyers for the 10th consecutive year, pushing global holdings to a record year-end total of 2,885.5 metric tons. The trends report says the inflows were highest in the third quarter when the U.S. dollar gold price rallied to a six-year high.
Annual buying still reached 650.3 metric tons, the second highest level for 50 years and only six metric tons lower than in 2018.
Gold-backed exchange-traded funds inflows bucked the general trend, with investment in these products holding up strongly throughout the first nine months of 2019, reaching a high of 255.5 metric tons in the third quarter. There was lower momentum, however, in the fourth quarter to 26.4 metric tons, according to the trends report.
Looking at the fourth quarter of 2019, gold demand fell 19% to 1,045.2 metric tons over the fourth quarter of 2018, and the report states the two main contributors to the drop were lower jewelry demand and investment in gold bars, largely in response to the higher gold price.
Gold Demand Trends states that China and India held sway over global consumer demand. Together, the two gold-consuming giants accounted for 80% of the year-over-year decline in fourth-quarter jewelry and retail investment. Higher gold prices and a softer economic environment were the key culprits.
Other key points of the Gold Demand Trends report issued Jan. 30 include:
• Total consumer demand in 2019 fell to 2,977.7 metric tons from 3,333.8 metric tons in 2018.
• Total investment demand grew 9% in 2019 to 1,271.7 metric tons from 1,169.8 metric tons in 2018.
• Global jewelry demand slipped 6% from 2018 to 2,107 metric tons in 2019.
• For the fourth quarter, jewelry demand was down 10% to 584.5 metric tons, compared with 646.1 metric tons in the 2018 quarter.
• Recycling grew to 1,304 metric tons, compared with 1,176.1 metric tons in 2018.
• Demand in the technology sector in the fourth quarter of 2019 fell by 1% to 83.8 metric tons, compared with 84.3 metric tons in the fourth quarter of 2018.
The gold outlook states the World Gold Council believes “financial and geopolitical uncertainty combined with low interest rates will likely bolster gold investment demand,” and that net central bank purchases of gold will remain good.
“Momentum and speculative positioning may keep gold price volatility elevated, and that gold price volatility, as well as expectations of weaker economic growth, may result in softer consumer demand near term, but structural economic reforms in India and China will support demand in the long term,” according to the outlook.
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