Gold Demand Hurt By Surging Equity Markets In 2017 - WGC
(Kitco News) - Gold demand rallied in the fourthquarter of 2017, but it was not enough to save last year from an annual drop,the World Gold Council (WGC) said in its latest report.
Overall demand declined 7% to4,072 metric tons during fiscal year of 2017, down from 4,362 metric tonsreported in 2016, the WGC said in its “Gold Demand Trends Full Year 2017”report.
Rising equity markets andchanging central-bank policies were mainly behind the drop.
“It’s not surprising to seeoverall gold demand down given the backdrop of monetary policy tightening andstrong equity markets in 2017, but the market is not in bad shape,” the WGC’shead of Market Intelligence, Alistair Hewitt, said in a press release publishedon Tuesday.
Lagging Investment Demand
Investment demand was down 23%year-over-year at 1,232 metric tons last year.
WGC said there was a significantpullback in purchases of gold bars and coins, down 2%, driven by a lacklusterU.S. market.
Annual inflows into gold-backedETFs were also down 63%, registering only 202.8 metric tons in 2017 after 546.8metric tons in 2016.
“European-listed gold-backed ETFsaccounted for 73% of net inflows, with investors keenly attuned to geopoliticsand negative interest rates,” the WGC report noted.
Recovery Of Jewelry And Technology Demand
On a positive note, the goldmarket saw a 4% recovery in jewelry demand last year, as both Chinese and Indianconsumer sentiment was lifted. This marked the first increase in five years.
But, the WGC added that jewelrydemand still remains weak compared to historical standards.
Also, technology use was on therise for the first time in eight years, up 3% on an annual basis, with moredevices using gold, including smartphones and laptops.
“Jewelry demand picked up aseconomic conditions improved in China and a policy change in India removed abarrier to demand, while next-generation smartphones boosted gold demand fromtechnology companies,” Hewitt said.
Central banks continued to buythe precious metal, but official gold reserves were down 5% in comparison to2016, with 371 metric tons bought.
“Russian gold reserves increased224t - the third consecutive year of +200t growth,” noted the WGC.
Total gold supply fell 4% to4,398 metric tons in 2017, dragged down by recycling, which was down 10% on anannual basis.
“East Asian and Middle Easternmarkets drove declines in recycling during 2017,” the report said, adding that“unusually high recycling levels in 2016 were the main cause of a 10% y-o-ydecline in 2017, as recycling activity normalized.”
Mine production, on the otherhand, edged up to a record high of 3,269 metric tons last year.
“New mine starts in recent yearshave mostly served to fill the gap left by production losses elsewhere, whichhas led to a relative plateauing in global output,” the report said.
Q4 Rally Led By Investment Demand
Despite an annual drop in demand,Q4 was positive quarter, with demand rising 6% on an annual basis to reach1,095.8 metric tons.
The increase was driven byinvestment demand, which was up 41% during the last quarter of 2017.
Jewelry and technology demandrose 3% and 5% respectively.
“Indian jewelry demand recoveredin Q4, gaining 4% y-o-y to reach 189.6t, the highest fourth quarter in our17-year series,” the report pointed out. “Rupee gold prices trended lowerduring the quarter, which proved positive for demand.”
By Anna GolubovaFor Kitco News
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