Global gold demand held firm at 1,083.8t in Q1 2020, a rise of 1% on the same period last year, according to the World Gold Council’s latest Gold Demand Trends report.
The global COVID-19 pandemic fuelled safe-haven investment demand for gold, with gold-backed ETFs attracting huge inflows (+298t) to push global holdings in these products to a record high of 3,185t.
Conversely, consumer-focused sectors of the market weakened sharply. Jewellery demand was hit hard by the effects of the outbreak and quarterly demand dropped 39% to a record low of 325.8t.
Q1 inflows into gold-backed ETFs saw a seven-fold year-on-year increase amid global uncertainty and financial market volatility. Holdings of ETFs reached a record high of 3,185t by the end of Q1.
Sharp investment inflows helped push the US dollar gold price to an eight-year high. Consequently, demand in value terms reached US$55bn – the highest since Q2 2013. The price reached a new record high in Indian rupees and Turkish lira, among others.
The pandemic slashed jewellery demand as global governments imposed lockdown measures. Demand fell to previously unseen lows, led by a 65% decline in China – the largest jewellery consumer and the first market to succumb to the outbreak.
Central banks continued to amass gold, although at a slower pace. Amid heightened volatility and uncertainty, global reserves grew by 145t in Q1. Russia announced it would suspend its long-term buying programme, signalling a slowdown in global net buying for Q2 and beyond.
Total Q1 supply fell 4% as coronavirus lockdowns disrupted mine production and recycling. Operations were halted at many projects in an attempt to stem the spread of the virus. And recycling ground to a near standstill towards the end of the quarter as consumers were confined to their homes.
Louise Street, Market Intelligence at the World Gold Council, commented:
“The COVID- 19 pandemic has had a significant and unprecedented impact on global gold demand. The modest strength in the first quarter was due to investment demand, fuelled by huge inflows into gold-backed ETFs. 75
“In contrast, consumer-focused sectors of the market have suffered drastically. With governments across the world implementing lockdowns to stop the spread of the virus, jewellery demand has plummeted, led by a 65% decline in China.
“Gold demand will continue to feel the effects of COVID-19 for the rest of 2020. In particular, the divergence between investment in gold-backed ETFs and consumers via jewellery will likely continue until there is greater economic and market certainty.”
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The key findings included in the Demand Trends Q1 2020 report are as follows:
- Overall demand grew in Q1 by 1% year-on-year to 1,083.8t
- Total investment demand increased by 80% year-on-year to 539.6t
- Total consumer demand decreased by 28% from 791t in Q1 2019 to 567.4t in Q1
- Global jewellery demand fell by 39% to a record low of 325.8t
- Central banks net buying fell by 8% year-on-year to 145t
- Bar demand weakened to 150.4t, a year-on-year decline of 19%
- Demand in the technology sector fell 8% to a new low of 73.4t
- Total supply dropped by 4% year-on-year
The Gold Demand Trends Q1 2020 report, which includes comprehensive data provided by Metals Focus, can be viewed here