Gold demand hit a five-year low last year as buying of jewellery, coins and bars failed to keep pace with 2013’s elevated levels, particularly in major consumer China, the World Gold Council said yesterday.
But the declining trend in demand, which has fallen every year since its 2011 peak, is likely to turn around in 2015, the WGC’s managing director for investment, Marcus Grubb, said.
“In tonnage terms, we expect the market to come in somewhere between 4,100 tons and 4,200 tons in the full year (2015),” he said. “We see Indian demand rising, and I think you’ll see a big improvement in China too.”
The 2014 drop in demand was limited by slower liquidation of bullion-backed funds, an uptick in official sector demand, and a recovery in Indian gold jewellery buying.
World gold demand fell 4 per cent to 3,924 tons last year, the lowest annual total since 2009, according to the WGC data, prepared in conjunction with GFMS analysts at Thomson Reuters.
“We expect to see 400 tons taken off the market by the central banks this year,” Grubb said.
“Jewellery demand will also be a big driver in 2015, and if we see a stronger gold market, you will see an improvement in investment demand, which also means in the exchange-traded funds.” Global gold jewellery buying fell 10 per cent last year, while Chinese jewellery demand fell 33 per cent to 623.5 tons.
Overall investment rose 2 per cent to 905 tons from 885 tons, chiefly due to a sharp reduction in selling from gold-backed ETFs to 159 tonnes from 880 tonnes in 2013.
Demand for gold coins and bars dropped 40 per cent, declining 50 per cent in China, 23 per cent in the Middle East, 46 per cent in Turkey and 31 per cent in the US.
Indian demand for coins and bars also fell 50 per cent, but its jewellery buying rose by 8 per cent to a record 662 tons, largely due to strong festival- and wedding-related demand in the fourth quarter.
Easing consumer demand was offset by a 16 per cent rise in central bank buying to 477 tons last year. The bulk of acquisitions were in Russia, with Kazakhstan and Iraq also seen buying.
On the supply side of the market, gold mine output rose 2 per cent to a record 3,114 tons, while gold recycling fell to a seven-year low as prices struggled to recover from 2013’s sharp drop.
Overall supply was little changed.