High and volatile domestic prices of gold led to a marginal dip in the demand for the precious metal in India in 2018, even as central banks across the globe upped their buying to end the year at the highest level since 1971 and also the second-highest annual purchase ever recorded.
According to the latest report by World Gold Council (WGC), central banks bought 651.5 tonnes of gold in 2018, which was 74% higher than the previous year and also the second highest yearly total on record.
Incidentally, net purchases jumped to their highest level since the end of U.S. dollar convertibility into gold in 1971, as a greater pool of central banks turned to gold as a diversifier.
Alistair Hewitt, Head of Market Intelligence, WGC, attributed the surge in central bank buying to concerns related to slowdown in global growth, heightened geopolitical tensions, and financial market volatility.
Meanwhile, global gold demand reached 4,345.1 tonnes in 2018, up 4%, when compared to 2017 and in line with the five-year average demand of 4,347.5 tonnes. “The annual increase was driven by a multi-decade high in central bank buying and accelerated investment in bars and coins during the second half of the year,” the WGC report said.
The year also saw the overall retail investment in gold bars and coins grow 4% to 1,090.2 tonnes, even as coin demand surged to reach a five-year high of 236.4 tonnes, the second-highest on record. Further, annual jewellery demand was steady at 2,200 tonnes, down just one tonne from the previous year.
Drop in demand
According to WGC, gains in China, the U.S. and Russia broadly offset sharp losses in the West Asia, where demand dropped 15% compared to the previous year.
The gold demand in India was 760.4 tonnes in 2018, a marginal dip of 1.4% compared to the previous year’s demand of 771.2 tonnes. Further, total jewellery demand fell by 1% to 598 tonnes as compared to 601.9 tonnes in 2017.
While the total investment demand in 2018 was down by 4% at 162.4 tonnes, total gold recycled in India was 87.1 tonnes in 2018, slightly lower than 88.4 tonnes in 2017.
Somasundaram P.R., managing director, India, World Gold Council said that the demand was constrained due to relatively fewer auspicious wedding days and higher price volatility leading to a particularly pronounced effect on the gold demand in the fourth quarter of 2018.
“The trends since 2015 indicate rather clearly that transparency measures have had an impact on gold demand. There is an urgent need for the industry to organise and collectively address issues of trust and innovation, in order to face the inevitable next wave of transparency measures and grow gold’s share of consumer spend,” he added.
