Global gold demand fell by 13% in the first quarter (Q1) of 2023 compared to the same period a year earlier, reveals the latest quarterly report from the World Gold Council (CMO) published this Friday.
In its report on gold demand trends, the CMO says that while demand for gold (non-OTC) was down 13% year-on-year, a rally in the OTC market supported demand. total gold at 1,174 tons, a slight increase of 1% compared to the first quarter of 2022.
Central banks helped boost demand by adding 228 tonnes to global reserves, a record high for this data set, the report authors explain. Sustained and significant purchases by the official sector underscore the role of gold in international reserve portfolios in times of market volatility and heightened risk.
According to the CMO, jewelry remained relatively stable in the first quarter, at 478 tons. Chinese demand regained ground, hitting 198 tonnes in its first quarter of unhindered consumer activity since restrictions were lifted.
” This compensated for weaker demand in India, where consumption fell 17% year-on-year to 78 tonnes in the first quarter of 2023“, he indicated, adding that the strong increase in domestic gold prices was the main factor influencing the purchases.
Investment demand saw an ups and downs in the first quarter. The renewed inflow of gold-backed ETFs (Exchange Traded Funds) in March, mainly driven by systemic risk in the US economy, partially offset the January and February outflows and helped bring the quarterly outputs at a modest level of 29 tons, underlines the Council.
On the other hand, investment in bars and pieces strengthened 5% year-on-year to 302 tons, although there were notable changes in key markets. US demand for bars and coins hit 32t in Q1, the highest quarterly level since 2010, and was driven primarily by recession fears and a flight to safety amid banking turmoil.
” This increase helped to offset the weakness in Europe and in particular Germany, where demand fell by 73%“, note the authors. This notable decline in German demand is mainly due to the fact that real interest rates have turned positive and the rise in the price of gold in euros has encouraged profit taking.
As for the supply of gold, there was a slight total increase in Q1-2023, to 1,174 tonnes, with a marginal growth of 2% in mining production and a 5% increase in recycling, due to the rise of the price of gold.
” Against the backdrop of turmoil in the banking sector, ongoing geopolitical tensions and a challenging economic environment, the role of gold as a safe-haven asset has been highlighted“said Louise Street, Senior Markets Analyst at the World Gold Council, noting that investment demand is likely to increase this year, especially with weaker headwinds from the strength of the US dollar. and interest rate increases.
And to add: Positive demand for gold ETFs has continued in the second quarter so far, and the looming threat of a developed market recession could be the trigger for an acceleration in inflows later in the year“.
According to the analyst, central bank purchases are expected to remain strong and be the cornerstone of demand through 2023, even if they are at levels below the record highs reached last year.