World Gold Council reveals highest gold volume demand since 2005.
The World Gold Council (WGC) has today released its gold demand trends for Q1 2014, with gold jewellery demand climbing 3% year-on-year owing to lower gold prices and growth in demand in China.
According to the WGC, gold had a "robust" start to 2014, with demand virtually unchanged year-on-year at 1,074.5 tonnes. In the UK, gold demand climbed 29% in tonnage terms, with items of higher value increasingly making their way into shops.
Global jewellery demand made moderate gains of 3% largely due to lower gold prices compared with Q1 2013 and seasonal factors, notably Chinese New Year, which contributed to record first-quarter jewellery demand in China.
Jewellery demand totalled 570.7 tonnes globally in Q1 (compared to 554.7 tonnes in Q1 2013), said to be the largest Q1 volume since 2005. In most markets, jewellery demand was above or in line with, its five-year quarterly average, with China showing the strongest growth. The US was a clear exception to this rule, although demand continues to improve in line with the health of the economy.
Total global demand in value terms was worth US$23.7 billion (£14.1bn), with actual value falling 18% year-on-year – a function of the Q1 2013 value being the third highest on record at $29.1 billion (£17.3bn). Compared with the five-year quarterly average value of US$22.7bn (£13.5bn), Q1 2013 was up 5%.
According to the WGC, consumers made the most of gold prices that were "relatively appealing" compared with Q1 last year, with the strengthening global economic environment also supporting demand.
UK and US Q1 Jewellery Demand
In the UK, consumers were said to have reacted convincingly to the lower gold price, which was further amplified by the strengthening pound. Total UK gold demand in Q1 2014 was 3.5 tonnes with a value of $143 million (£85m), up 29% on Q1 2013’s total tonnage of 2.7 tonnes.
According to the WGC, signs of economic recovery and the fact that higher-priced inventory has now worked its way through the pipeline suggest more positive prospects for UK gold jewellery consumers.
In the US, jewellery demand grew on the foundations established in 2013, rising 5% in spite of severe weather conditions affecting demand in January. However, a strong February and March are said to have made up for early quarter weakness as consumers shifted from plated jewellery towards higher carat items, encouraged by retailers dedicating more shelf space to gold jewellery.
The year-on-year increase also reflected stock replenishment in the US, after stronger than expected Christmas-related demand in the fourth quarter of 2013.
Demand in China and India
Chinese consumers generated the largest year-on-year volume increase in jewellery demand. This was despite sizeable upward revisions to 2012 and 2013 data for China as more information came to light regarding the extent of demand at that time. The seasonal impact of Chinese New Year being closely followed by Valentine’s Day, and the strong gold buying and gifting traditions associated with those two occasions drove jewellery consumption to a record first quarter volume.
China exhibited 10% year-on-year growth in Q1 2014, achieved thanks to rising incomes that continued to support consumption. As anticipated, China’s gold demand tailed off suddenly once the festive occasions were over, with the concurrent rising gold price also acting as a brake on demand.
The WGC says it continues to view India as a "source of strong latent demand", which will hit when the government restrictions on gold are eased. Indicative of this is the strength of demand in the UAE, which can be taken as a proxy for Indian demand given the prevalence of non-resident Indians among the gold-buying populace.
Gold Supply in Q1
The supply of gold in the first quarter increased marginally climbed 1% compared with the same period of 2013. An additional 55.7t from mine supply was offset by a 46.6t reduction in recycled gold.
Growth in gold mine production climbed 6% year-on-year in Q1, due to new operations either ramping-up or coming on-stream. Mining companies continued to take steps to contain costs and increase operational efficiencies, which the WGC says should feed through to continued growth in mine production in coming quarters.
At the country level, Canada remained the foremost contributor in the gold supply chain, with continued growth at the new Detour Lake, Canadian Malartic and Young-Davidson mines. In the Dominican Republic, production continued to ramp up at the Pueblo Viejo mine, which came on-stream in late 2012.
Declines in production were relatively limited in scale. Having commenced gold production in 2011, Eritrea’s Bisha mine has depleted the high-grade gold-enriched oxide cap and began last year to transition to low-cost, high-grade copper production, targeting areas of the deposit which are not rich in gold deposits.
To read the World Gold Council’s Gold Demand Trends for Q1 2014, click here.
For a review of global and UK gold demand in 2013, click here.