Gold Market Structure and Trends

Global gold demand in Q1 2017 was 1,034.5t. The 18% y-o-y decline suffers from the comparison with Q1 2016, which was the strongest ever first quarter. Inflows into ETFs of 109.1t, although solid, were nonetheless a fraction of last year’s near-record inflows. 

A barrage of policy initiatives aimed at purging India of black money and instilling greater transparency rocked India’s economy last year, including its gold market. The most dramatic was the radical decision to demonetise over 15 trillion rupees, around US$220bn. 

2016 full-year gold demand gained 2% to reach a 3-year high of 4,308.7t. Annual inflows into ETFs reached 531.9t, the second highest on record. Declines in jewellery and central bank purchases offset this growth.

In 2015 India was the world’s fast growing economy; in recent years millions have been lifted out of poverty and India’s middle class has swelled. This is important because our econometric analysis indicates income growth drives gold demand. 

China has gone through remarkable change in the past 30 years. Within one generation, the shape of our economy has altered beyond all recognition: agriculture’s share of output has fallen and the service sector has become an important driver of growth.

Third quarter gold demand fell 10% to 992.8 tonnes (t). While this was the lowest quarter since Q2 2015, year-to-date demand is up 7%. 

Gold coins are intrinsic to gold demand, not just in India, but across the world. In most countries that have an affinity with gold however, that relationship is symbolised by a sovereign gold coin.

Continued growth in Q2 2016 (+15%) brought total H1 gold demand to 2,335t – the second highest first half on record.