World Gold Council: Gold Demand Trends

Yesterday the World Gold Council released its “Gold Demand Trends” for Q4 and full year 2011, billed as “the leading industry resource for data and opinion on world-wide gold demand.” Among the headline numbers, gold demand last year reached 4,067.1 tonnes – the highest level since 1997, with investment demand rising by 5% and hitting a new record high of 1,640.7 tonnes. Gold mine output increased 4% to a new annual record of 2,809.5 tonnes.

Gold recycling – which accounts for the gap between gold mine output and total demand – fell by 2%. This is the second yearly fall in this stat since the peak of 1,694.7 tonnes was reached in 2009. Consider though that recycled gold accounted for just 800 tonnes (roughly) of supply in 2002. People are selling gold for money, rather than looking to buy gold as a store of value and means of increasing their purchasing power. Anecdotally, the evidence for this confronts you every time you visit your local shopping mall: you may find kiosks and shops offering to buy gold in exchange for cash, but precious few looking to do the reverse transaction.
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dali lambone said:

I was in my LCS in Virginia a few weeks back. I was bored that day and thought I'd go buy a few eagles. I literally waited in line almost an hour because there were so many people selling their coins and jewelry, and the spot was several days down! I just sat back and shook my head thinking that these guys were really going to be needing that gold and silver in the next few years. It was almost sad to think of how bad these average people are screwing themselves.

I have been to that shop maybe 4 or 5 times. I am the only person I have ever seen that actually made a purchase. Everyone else is selling and it's getting sent off as scrap to get resmelted.

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Reporting from Beijing— A bit player only a decade ago, China has emerged as one of the most important forces in the global gold market, helping fuel the rising value of the precious metal.

Already the world's largest producer — it overtook South Africa in 2007 — China is now bedecking itself in bling. It's on track to become the globe's largest consumer of gold as early as this year, knocking off India — whose elaborate wedding dowries kept it on top for years.

Some of China's gold is going to its central bank as the government quietly boosts reserves. But the biggest driver is Chinese consumers. They're snapping up jewelry, coins and bars as a hedge against inflation and to flaunt their rising wealth.

To witness the frenzy firsthand, head to Beijing's Caishikou Department Store, a four-story gold emporium that rang up sales of $1.5 billion last year. Visitors be warned: sharpen your elbows and be ready to push.
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Chinese demand reached nearly 770 metric tons last year, up 20% from the year before, according to the World Gold Council in London. Desire for the yellow metal is so strong that China is buying record amounts from abroad because its mines can't keep pace. China imported more gold than India in the fourth quarter of 2011.
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In addition, Chinese consumers eventually were allowed to purchase bullion through commercial banks. Today China accounts for 26% of global gold demand, up from 6% a decade ago.

"Chinese demand has traded positions with the U.S. in the last decade," said Albert Cheng, Far East managing director of the World Gold Council. "It's very clear the gold market is moving east."
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bushi said:

Question: what about Chinese gold production - I've read a report, that they are the biggest gold diggers, "something slightly above 300 tonnes/yr, 50% more yearly production over next in line, Australia". The same report states, that no single OZ of this production can be sold to anyone else, but Chinese govt. And last time I checked, Chinese CB is rather not selling any of their gold - which means they are adding quickly to their gold reserves, from both sides - market, AND their own extensive mining.

Can anyone share some thoughts on that?

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ancona said:

i believe they are in the process of building enough of a reserve to return to a precious metal standard.

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Q1 gold demand (excluding OTC demand) slipped 5% y/y to 1,102t, due to continued ETF outflows. Inclusive of sizable OTC buying by investors, total gold demand increased 3% y/y to 1,238t – the strongest first quarter since 2016.

Q1 saw no let-up in the pace of central bank gold buying: 290t (net) was added to official holdings, only part of which is currently reflected in IMF data.

Bar and coin demand matched the previous quarter at 312t, translating to a 3% y/y increase.

Global gold ETF holdings fell by 114t. Europe and North America both saw quarterly outflows, slightly countered by inflows into Asian-listed products. US-listed funds saw a positive shift late in the quarter.
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