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2014 gold demand declines despite 6% surge in final quarter

GOLDEN SECURITY
Central banks continue to see the value of gold as a reserve asset

GOLDEN SECURITY Central banks continue to see the value of gold as a reserve asset

27th February 2015

By: Ilan Solomons

Creamer Media Staff Writer

  

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Gold demand in the fourth quarter (Q4) of 2014 rose 6% to 987.5 t from 930 t for the same period during 2013, propelled largely by jewellery demand and central bank buying, according to the World Gold Council’s ‘Gold Demand Trends’ full year report, which was released this month.

However, the report notes 2014 full year gold demand declined 4% to 3 924 t from 4 087.6 t in 2013.

“Jewellery remains the biggest source of demand for gold. Total jewellery demand for the year was 10%, down to 2 153 t from 2 384.6 t recorded in the previous year, which is not surprising given the price-driven jewellery demand surge in 2013.”

The report states that India, which is one of the largest gold markets in the world had its strongest year for jewellery demand since the World Gold Council’s records began in 1995, up 8% to 662.1 t in 2014 from 575 t in 2013.

The report explains that this demand growth was driven by wedding and festival buying despite India’s restrictions on gold imports for most of the year.

Further, the report says, although China recorded a 33% year-on-year (y-o-y) decline to 623.5 t from 989 t in the previous year, it still represented the second best year for jewellery demand in China since 1995.

Investment demand was the other big driver of the gold market, up 2% to 904.6 t from 885.4 t in 2013.

However, the report states total bar and coin investment was down 40% in 2014 to $43.3-million, compared with $80.1-million in the previous year as investors – who had made major purchases in 2013 – held back from further purchases.

This was offset by a “dramatic” slowdown in outflows from exchange-traded funds, which declined from 880 t in 2013 to 159 t in 2014.

The report also points out that central banks continued to see the value of gold as a reserve asset in 2014.

“Yearly central bank demand was up 17% to 477 t in 2014 from 368.6 t in the previous year. This was particularly evident in Q4 2014, when demand was up 40% y-o-y to 119 t, compared with 85 t in Q4 2013, making Q4 2014 the sixteenth-consecutive quarter, and 2014 the fifth consecutive year that central banks were net purchasers of gold.”

Total gold supply in 2014 was virtually unchanged, compared with 2013 at 4 278 t, as recycling contracted to a seven year low, offsetting yearly mine production growth, which was up 2% to a record 3 114 t from 3 018 t in 2013.

World Gold Council investment strategy MD Marcus Grubb says 2014 was a year of “stabilisation and innovation” in the gold market, with yearly gold demand down by 4% after the record-breaking level of buying seen in 2013.

“What is particularly notable about 2014 is that the striking shift in physical gold demand from West to East is now being followed by gold infrastructure development in Asia. New products and trading platforms were introduced like the Shanghai Gold Exchange International Board, the Gold Send mobile application in Turkey and the new kilobar contracts in Singapore and Hong Kong, which are all designed to make gold more accessible to greater numbers of buyers in the East,” he concludes.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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