Feb 03, 2017

WGC: Investment Demand for Gold at 4 Year High, Jewellery Demand at 7 Year Low in 2016

Releasing its Gold Demand Trends Annual Report for 2016, World Gold Council today said that a four-year high in investment drove price gains and overall demand growth, even as the demand from the jewellery sector reached a seven-year low. 2016 full-year gold demand gained 2% to reach a 3-year high of 4,308.7t.

Jewellery demand at 2,041.6t was pushed down by rising prices for much of the year, regulatory and fiscal hurdles in India, and China’s softening economy, the report said. The jewellery sector saw a 15% decline in full year demand, with a 5% drop in Q4 (to 622.0t).

Most markets saw losses, with just one or two exceptions. India and China – the two largest markets – together accounted for a 273t dip, almost 80% of the 347.0t decline in full-year demand.

India saw the biggest decline of 22%. Annual demand was 148.3t below 2015 – the biggest yearly decline recorded in WGC’s historical data series.

The report however, sees the future in a more positive light. It says that the latest monsoon was good and rural incomes correspondingly healthy which is positive for gold demand, and national jewellery chain stores outperformed smaller, independent stores during Q4 indicating the possible impact of an increase in digital transactions. WGC said that it expects healthy levels of pent-up demand – and re-stocking by the trade – to support the market in the coming months.

On the investment front, annual inflows into ETFs reached 531.9t, the second highest on record, while bar and coin demand was broadly stable at 1,029.2t, helped by a Q4 surge.

The gold price ended the year up 8%. Having risen 25% by the end of September, gold relinquished some of its gains in Q4 following Trump’s conciliatory acceptance speech and the FOMC’s interest rate rise.