Global gold jewellery demand fell to a seven-year low in 2016

Feb 04, 2017, 00:33
Global gold jewellery demand fell to a seven-year low in 2016

"We anticipate numerous headwinds that affected demand in 2016 to continue into this year, but we are confident that the government's move towards a more transparent gold market will ensure that gold remains an important asset class for millions of people in India", said Alistair Hewitt, head of market intelligence at the WGC.

A bounce in investment to a four-year high drove a modest gain in gold demand last year, data from the World Gold Council showed on Friday, even as use of the metal in jewellery slid to its lowest since 2009 and coin and bar buying dipped.

This year, investment demand for gold is on the rise.

"Past year saw an unprecedented degree of political upheaval, which underpinned huge institutional investor flows into gold".

Total investment demand for 2016 was down by 17.1% at 161.5 tonnes in comparison with 194.9 tonnes in 2015 while in value terms, gold investment demand was Rs 43,647.5 crore, a fall of 6.3% from 2015 (Rs 46,597.3 crore).

"Investment as a whole posted its best year since 2012, but elsewhere demand was subdued". The authors of the report ascribe the 15% fall in global jewellery demand to rising prices for much of the year, regulatory and fiscal hurdles in India and China's softening economy were key reasons for weakness in the sector.

Central banks also cut gold acquisitions by 33% to a six-year low of 383.6 tonnes, owing to pressures on foreign-exchange reserves. "ETFs are easy ways for people to access gold".

"There are three primary factors that fuelled strong inflows into ETFs - we had the spread of negative interest rates, then the steady pushback in expectations surrounding USA interest rate (hikes), and the uncertainty stemming from geopolitical risk", said Alistair Hewitt, head of market intelligence for the industry-funded WGC.

In its Gold Demand Trends report, the World Gold Council (WGC) has indicated challenging times for Indian investment market in 2017.

Total supply, globally, reached 4,571 tonnes in 2016, an increase of 5 per cent compared with 2015. Mine production remained virtually unchanged from 2015 as a result of industry cost-cutting schemes, however, higher gold prices and lower costs have seen a renewed interest in exploration and increased project development is likely in the years ahead. Recycling increased by 5% to 250t during the fourth quarter, from 239t during Q4 previous year.

HSBC expect demand to recover for as long as gold stays under $1,200 an ounce.

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