Total gold supply is set to increase by 2.2% year-on-year this year, led by mine production, says the GFMS team at Refinitiv.
Refinitiv predicts this year will finish as another year of net de-hedging, albeit at a forecast 29 t, which will be 29% lower than in 2017.
On the demand side, net physical demand has been calculated at 3 783 t, which is 5% lower year-on-year.
On final analysis, the net physical surplus is forecast to reach 745 t this year, compared with 257 t in 2017.
Refinitiv says jewellery consumption looks set for a modest fall this year of around 4% year-on-year, driven by lower consumption in key markets such as India.
Industrial fabrication demand is likely to rise by a modest 0.4% this year to an estimated 380 t.
The rise in demand had been apparent in the electronics sector at 0.8%, or 278 t – a record high. This is the second consecutive yearly increase in this sector.
The net official sector demand is expected to increase by almost 23% to 450 t, given the backdrop of a global trade war, ongoing US sanctions, rising yields and a strengthening dollar.
“It is unsurprising that central banks are looking to increase their safe haven exposure in the form of gold while reducing their exposure to foreign exchange reserves,” says Refinitiv.
Emerging markets, particularly those that have recorded muted transactions this century, have increased their purchases this year.
Retail investment (coin and bar) demand is expected to decline by more than 11% this year as other higher performing assets have taken market share.
Coin demand, which struggled in the first half of this year, is expected to rise by 9% this year to 269 t.
Exchange-traded funds inventory build-up contracted this year after two consecutive years of increases. “We forecast net outflows this year of 23 t. This appeared to be the result of funds being redirected to higher yielding assets,” says Refinitiv.
Meanwhile, the US/China trade war remains the big event of this year, having little positive impact on price and pushing it below the $1 200/oz level, after gold traded above $1 300/oz in the first two quarters.