Global gold demand drops 18 per cent to 1,034 tonne in Q1 2017: WGC

Mumbai: Global gold demand declined by 18 per cent during the first quarter of 2017 to 1,034 tonne, mainly due to less inflows into exchange-traded funds (ETFs) and slower central bank demand, according to the World Gold Council (WGC).

The overall demand stood at 1,262 tonne in Q1 2016, according to the WGC's latest Gold Demand Trends report.

"Demand is down but that is largely because Q1 last year was exceptionally high. Although we did not see the record-breaking surges in ETF inflows experienced in Q1 2016, we have seen good inflows nonetheless this quarter, with strong interest from European investors ahead of the Dutch and French elections," WGC Head of Market Intelligence Alistair Hewitt said.

Inflows into ETFs was 109 tonne, which was a fraction of last year's near-record inflows of 342 tonne largely concentrated in Europe due to continued political fragility in the region, WGC Managing Director, India, Somasundaram P R told PTI here.

Slower central bank demand also contributed to the weakness with 76 tonne added to the reserves from 104 tonne in Q1, 2016.

"This was down 27 per cent on Q1 2016. China's purchasing programme was on pause during the quarter as its foreign exchange reserves remained under pressure," the report added.

However, bar and coin investment was healthy and grew 9 per cent at 290 tonne, while demand firmed slightly in both the jewellery and technology sectors.

"Retail investment demand is strong too, up 9 per cent year-on-year with demand at over USD 11 billion in Q1. China led the way with bar and coin demand surging 30 per cent, breaching 100 tonne for only the fourth time on record, fuelled by concerns over potential currency weakness and a frothy property market," Hewitt added.

Jewellery demand in the first quarter was marginally up at 481 tonne from Q1 2016. "Gains in India were the main reason for the slight increase. But demand remains relatively weak in an historical context, 18 per cent below the 5-year quarterly average," the report said.

"Jewellery demand is still in the doldrums, although there are signs of improvement, especially from India where the gradual remonetisation of the economy is supporting the jewellery market," Hewitt said.

Meanwhile, the report said the total supply went down by 12 per cent to reach 1,032 tonne in the first quarter, compared with 1,175 tonne in the first quarter of 2016. There was also a 21 per cent fall in recycling to 283 tonne from 360 tonne during Q1 last year.

The drop in recycling indicates a return to more normal levels after sharp price movements drove exceptional levels in Q1, 2016, the report said. Te report said mine production of 764 tonne was little changed from Q1 2016 (768 tonne), and in line with the expectation that production will remain broadly steady before tailing off.