Gold investment rises as jewellery demand falters

Gold investments in the form of gold backed exchange traded funds (ETFs) witnessed a huge jump in the first three months of 2020, even as jewellery demand took a significant hit on account of the global COVID-19 pandemic that led to lockdowns in most countries.

As per the latest Gold Demand Trends report by the World Gold Council, global gold demand held firm in the first quarter of 2020 at 1,083.8 tonnes, a rise of 1% compared to the corresponding period last year.

“The global COVID-19 pandemic fuelled safe-haven investment demand for gold, with gold-backed ETFs attracting huge inflows (+298 tonnes) to push global holdings in these products to a record high of 3,185 tonnes,” stated the report.

The first quarter inflows into gold-backed ETFs saw a seven-fold year-on-year increase amid global uncertainty and financial market volatility, it added.

Meanwhile, consumer-focused sectors of the market weakened sharply as jewellery demand was hit hard by the effects of the outbreak and quarterly demand dropped 39% to a record low of 325.8 tonnes, as per the global gold body.

“The pandemic slashed jewellery demand as global governments imposed lockdown measures. Demand fell to previously unseen lows, led by a 65% decline in China, the largest jewellery consumer and the first market to succumb to the outbreak,” the report said.

However, central banks continued to buy gold, though at a much slower pace, as global gold reserves grew by 145 tonnes in the first three months of the current calendar year.

Interestingly, Russia has announced it would suspend its long-term buying programme thereby signalling a slowdown in global net buying for the second quarter and beyond.

On the price front, sharp investment inflows helped push the gold price in dollar terms to an eight-year high following which the demand in value terms reached $55 billion, the highest since the second quarter of 2013.

Incidentally, the gold price reached a new record high in Indian rupees and Turkish lira, among others.

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Printable version | Jan 16, 2021 1:45:29 AM |

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