Commodities Corner: Global Q1 gold demand down 23% year on year

United States

Global gold demand in the first quarter dropped from a year ago on the back of a more than 70% year-on-year decline in gold investments, according to a report from the World Gold Council released Thursday.

Total world gold demand for the quarter was at 815.7 metric tons, down 23% compared with the first quarter of 2020, though it was “on a par” with the fourth quarter of 2020, the report said.

The investment segment of gold demand fell by 71% year over year in the first quarter to 161.5 metric tons, as gold-backed exchange-traded funds saw outflows of 177.9 metric tons, compared with inflows of 299.1 metric tons the same time a year ago.

“Bargain-hunting,” however, boosted bar and coin investment by 36% from a year ago to 339.5 metric tons, according to the report.

“Lower gold prices and continued economic recovery in Q1 2020 encouraged a very positive consumer response, particularly as many countries saw a continued gradual easing of lockdown restrictions,” said Louise Street, senior markets analyst at the World Gold Council.

Prices for the most-active gold futures contract lost about 9.5% in the first quarter. The June gold contract GCM21, +0.56% settled at $ 1,773.90 an ounce on Comex Wednesday, and is trading more than 6% lower for the year so far.

See: Why gold’s biggest quarterly drop in 4 years doesn’t mark the end of its bull cycle

Demand for gold bars and coins also saw a “strong recovery from last year’s pandemic-stricken Q1,” to stand at the highest since the fourth quarter of 2016, “as investors bought into the price dip,” said Street. “Growing concerns over inflation were also a driver, she added.

Still, that positive gold consumer response was “countered by significant outflows from gold-backed ETFs after last year’s record-breaking inflows,” said Street. Gold-backed ETF outflows were “concentrated in Western markets while Asian fund saw net inflows, led by China.”

The jewelry segment of gold demand, meanwhile, saw a 52% rise in the first quarter, compared with a year earlier, to total 477.4 metric ton, according to the World Gold Council report. “India and China were the main engines of this growth,” Street said.

Jewelry demand from China, in particular, more than tripled, jumping 212% to 191.1 metric tons — the highest quarterly total since 2015, the report said. It attributed the strong quarterly result to “improving domestic economic conditions, lower gold prices, and sales booms sparked by Chinese New Year, Valentine’s Day and International Women’s Day.”

The gold market also saw overall demand growth in the technology sector for three months ended March 31, up 11% year on year to 81.2 metric tons, with electronics accounting for 13% of that rise, according to the report.

Also see Global silver demand poised to rise this year; prices could jump more than 30%: report