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- Author of the entry: Mennica Skarbowa
- Date of entry:
Global demand for gold in the past quarter amounted to 1,034.5 tons, down 18 percent year-on-year, according to the World Gold Council (WGC) today. However, experts point out that demand for gold bars and investment coins rose by as much as 9 percent during this period.
Why such a difference? It is primarily the result of changes in the structure of demand. Inflows into EFT funds amounted to a solid $109.1 billion in the past quarter, but compared to the best first quarter in history, i.e., Q1 2016, they did not stand a chance. Year-on-year, they fell by as much as 68%, clearly affecting the current performance of the entire investment gold sector. However, thanks to strong demand for physical gold in the form of gold bars and coins, this decline was minimized to 34%.
As WGC experts emphasize, the good results in the physical gold investment sector are a continuation of the strong fourth quarter of last year. Demand soared particularly in China (+30 percent), India (+14 percent), and Europe (+9 percent). As usual, the German market proved to be the strongest, recording sales of 34.3 tons in the first quarter, which corresponds to a 13% increase in demand. Among the countries covered by WGC statistics, Austria, Switzerland, and the United Kingdom also recorded good results, with demand for physical investment gold in the UK reaching its highest level since mid-2013. European institutional investors also increased their gold purchases, attributing their growing interest in the precious metal mainly to geopolitical tensions and a series of election campaigns in key markets.
In Poland, which has not yet been given a separate position in the WGC's studies, demand for physical gold followed the trends in German-speaking countries. "As a publicly traded company, we cannot yet provide official data on sales in the first quarter, but we can clearly see that Poles are increasingly willing to buy gold. Interestingly, small bars are growing in popularity, as customers see them as a safeguard in case the funds held in the banking system suddenly become unavailable," says Jarosław Żołędowski, president of Mennica Skarbowa S.A.
Among other areas of demand for gold, the jewelry industry recorded a 1% increase, while the technology industry, dominated by the electronics sector, saw a 3% increase. Gold purchases by central banks have slowed significantly since their peak in 2014, amounting to 76.3 tons in the first quarter. Against the global trend, Russia stood out, continuing its purchases of the precious metal in the past quarter and increasing the share of gold in its reserves to 17%, the highest level since 2000.
On the supply side, the first quarter saw a 12% decline, mainly due to a reduction in the amount of gold obtained from the secondary market, which was clearly affected by the comparison with the exceptionally strong Q1 2016. Gold mining remained unchanged, once again suggesting that the peak in gold supply is behind us, which should have a positive impact on its price in the long term.
Marianna Wodzińska
Head of Trading
Mennica Skarbowa S.A.
Head of Trading
Mennica Skarbowa S.A.
