The global COVID-19 pandemic fuelled safe-haven investment demand for gold, with gold-backed ETFs attracting huge inflows (+298t) to push global holdings in these products to a record high of 3,185t.
Conversely, consumer-focused sectors of the market weakened sharply. Jewellery demand was hit hard by the effects of the outbreak and quarterly demand dropped 39% to a record low of 325.8t.
Q1 inflows into gold-backed ETFs saw a seven-fold year-on-year increase amid global uncertainty and financial market volatility. Holdings of gold-backed ETFs reached a record high of 3,185t by the end of Q1.
Sharp investment inflows helped push the US dollar gold price to an eight-year high. Consequently, demand in value terms reached US$55bn – the highest since Q2 2013. The gold price reached a new record high in Indian rupees and Turkish lira, among others.
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.
Central banks continued to amass gold, although at a slower pace. Amid heightened volatility and uncertainty, global gold reserves grew by 145t in Q1. Russia announced it would suspend its long-term buying programme, signalling a slowdown in global net buying for Q2 and beyond.
Total Q1 supply fell 4% as coronavirus lockdowns disrupted mine production and gold recycling. Operations were halted at many projects in an attempt to stem the spread of the virus. And recycling ground to a near standstill towards the end of the quarter as consumers were confined to their homes.
Louise Street, Market Intelligence at the World Gold Council, commented: “The COVID-19 pandemic has had a significant and unprecedented impact on global gold demand. The modest strength in the first quarter was due to investment demand, fuelled by huge inflows into gold-backed ETFs.
“In contrast, consumer-focused sectors of the market have suffered drastically. With governments across the world implementing lockdowns to stop the spread of the virus, jewellery demand has plummeted, led by a 65% decline in China.
“Gold demand will continue to feel the effects of COVID-19 for the rest of 2020. In particular, the divergence between investment in gold-backed ETFs and consumers via jewellery will likely continue until there is greater economic and market certainty.”
The key findings included in the Gold Demand Trends Q1 2020 report are as follows:
- Overall demand grew in Q1 by 1% year-on-year to 1,083.8t
- Total investment demand increased by 80% year-on-year to 539.6t
- Total consumer demand decreased by 28% from 791t in Q1 2019 to 567.4t in Q1
- Global jewellery demand fell by 39% to a record low of 325.8t
- Central banks net buying fell by 8% year-on-year to 145t
- Bar demand weakened to 150.4t, a year-on-year decline of 19%
- Demand in the technology sector fell 8% to a new low of 73.4t
- Total supply dropped by 4% year-on-year