Gold Demand Trends Diverge
Wednesday, 2/19/2014 14:46
Diverging demand trends characterized the 2013 gold market, says World Gold Council...
The FINAL gold demand figures for 2013 are in, and they come as no surprise to anyone who has been following the gold market over the past year, writes Sumit Roy at Hard Assets Investor.
Last year was a tale of two markets for gold with record amounts of physical consumer buying that was offset by even larger amounts of selling in the investment gold market.
All told, global gold demand tumbled by 15% to 3,756.1 tonnes in 2013, according to the latest
Gold Demand Trends report from the World Gold Council.
On the physical side of the market, things couldn't have been any better. Jewelry demand jumped 17%, putting it back to what the WGC calls "pre-crisis" levels, or the highest point since 2008.
Even more impressive than the increase in jewelry consumption was the surge in physical bar and coin demand. That category saw an enormous 28% rise to a record 1,654.1 tonnes on the back of record demand from China.
Consumer gold demand in China (bar and coin demand plus jewelry) totaled 1,065.8 tonnes, surpassing India for the first time. However, India's demand was not shabby by any means. At 974.8 tonnes, it was the third-highest total ever and came in the face of stringent import restrictions by the government. Combined, China and India accounted for about half of global gold demand in 2013.
Also supporting demand were purchases by central banks. As a group, they purchased 368.6 tonnes, down 32% from the 50-year high set in 2012, but still a very healthy amount. According to the WGC, the big buyers were Russia with 77 tonnes; Azerbaijan with 20 tonnes; and Korea with 20 tonnes.
Overshadowing all of the aforementioned good news on physical demand was the massive investment selling in the gold market in 2013. Investors in exchange-traded funds and similar products sold an incredible 880.8 tonnes worth of gold. That's a big swing from the 279.1 tonnes worth of purchases in 2012, and was the primary reason why gold prices plunged 29% last year.
Finally, the supply side of the market was much less eventful than the demand side. Overall supply slipped 1.7%. A 14% decrease in recycled gold – which tends to fluctuate with prices – was partially offset by a 5% increase in mine production.
Coming off such a volatile year last year, 2014 promises to be an interesting period for the gold market. Investors should keep a close eye on whether the record gold demand in China keeps up, and whether the pace of selling by exchange-traded funds slows.
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