Demand for gold slips as investors opt for dollars

Robyn Ryan
May 6, 2017

"The weakness we were looking for in gold has materialized and we do think that current prices represent a good entry point for risk overlay trades", analysts at the bank said.

Total investment demand for the period was up by 14 per cent at 31.2 tonne against 27.5 tonne in the same period of 2016.

But demand remained relatively weak in an historical context, 18% below the five-year quarterly average, the report said.

On a global level, Indian recovery offset broad global weakness to support Q1 gold jewellery demand at 480.9t.

The domestic price includes a 10 percent import tax.In the first quarter of 2017, Indian demand rose 15 percent from a year ago, the World Gold Council said in a report earlier this week.

A slower pace of central bank buying helped push gold demand down 18% year-on-year in the first quarter, according to the World Gold Council.

The group also notes that European investors accounted for most ETF inflows in Q1, a trend that began in the second half of 2016.

The first-quarter drop in central bank buying is reported to feed into an 18 per cent fall in global gold demand.

The banks purchased 76.3 tons of gold in the first quarter of 2017, while they bought 104.1 tons during the same period in the previous year, the report said.

The total gold demand in the country stood at 107.3 tonne in the January-March of 2016, impacted by jewellers' strike over excise duty introduction. Bar and coin investment, however, was healthy, at 290t, an increase of 9% year-on-year, while demand firmed slightly in both the jewellery and technology sectors.

The government's push for transparency in India's economy began to take effect in the gold market, with a gradual shift towards electronic transactions, it 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.

"The steep y-o-y decline is largely due to recycling having jumped in Q1 2016 in response to sharply rising gold prices at that time".

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, the report added. "Comfortable pricing of gold has also been a major positive factor for incremental business during these sale seasons", said Abdullah.

The Gold Demand Trends Q1 2017 report, which includes comprehensive data provided by Metals Focus, can be viewed at http://www.gold.org/supply-and-demand/gold-demand-trends and on our iOS and Android apps. Trade in gold and jewellery reached Dh65.6bn previous year, accounting for 27 per cent of the total gold trade.

The World Gold Council has predicted a demand of 650-750 tonnes in India in 2017.

Other reports by VideoGamingPros

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