June 02, 2015

Gold Trends: Micro Diversity, Macro Stability

According to a recent report by the World Gold Council, global gold demand remained stable in Q1 2015. However, there were significant variations across segments and geographies which demonstrates the multi-faced nature of gold market. Please find below some of the key highlights:

Global Market in Balance: The global gold market was in balance for the first three months of 2015 as the top line demand was broadly neutral – down by negligible 1% (YoY).


Variations across Sectors and Geographies: Though conditions varied across geographies and sectors, on aggregate, these differences cancelled out. Weakness in jewellery and other segments were balanced by strength elsewhere (Investments). Similarly, higher volumes in India, Germany and South East Asian economies made up for declines in China, Thailand, Turkey and Russia.


A positive divergence was observed across various categories of investment demand. ETF flows were positive for the first time since Q4 2012 because of improved western investors’ sentiments towards gold. U.S listed products were main beneficiaries but German and UK ETFs too witnessed inflows.

Conversely, investments in bar and coin witnessed a decline, though it is still above pre-crisis levels (between 2005-07 it averaged just 100 tonnes as against more than 200 tonnes now). It came under pressure because of high gold prices (that led to profit booking in Turkey), and because rallying stock markets in two largest consumers of gold China and India (who make up 50% of consumer demand) forced domestic consumers to reappraise their gold buying intentions.

Gold Investment Demand in India at 6-year Low: The bull-run in Indian equity market has provided an attractive alternative to gold investment and investors have taken advantage of a range of better performing assets. Although bullion import has risen 28% (YoY) but it has more to do with curbs and levy imposed on gold imports last year to rein in ballooning current account deficit. The curbs have since been eased, thereby pushing up the quantity of gold imported.

Turkish Demand Lowest Since 2009 as Record Price Induced Profit Booking: The sharp decline in gold demand in Turkey can be traced to dwindling macroeconomic conditions in last two years that had resulted in sharp depreciation of lira. This, in turn, has propelled the local price of gold to near-record levels (prices have climbed to TL100/g during March), inducing profit booking but hurting consumer demand in process.





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