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Global gold market stabilises, set for positive 2015

12th February 2015

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

  

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JOHANNESBURG (miningweekly.com) – Following a year of “record-breaking” levels of buying within the gold market in 2013 and the subsequent stabilisation during 2014, the World Gold Council (WGC) said it was reasonably optimistic of a positive outlook for the industry for this year.

Gold demand – driven by jewellery and central bank buying – swung into recovery during the final quarter of 2014 with gold demand up 6% to 987 t, offsetting a sluggish third quarter and ending the year only 4% down at 3 924 t.

The WGC said 2014 was a year of stabilisation – in effect, a pullback from the exceptional year that was 2013.

WGC market intelligence head Alistair Hewitt told Mining Weekly Online that gold demand was expected to rise to between 4 100 t and 4 200 t in 2015, as the year immersed itself in the “infrastructure story”.

The global gold market infrastructure shift from West to East had become more prominent during 2014, despite a drop in demand from China as it “digested” the vast quantities of gold accumulated during the previous year.

The “striking” shift in physical gold demand was now being “followed” by gold infrastructure development initiatives in Asia that were making for a more efficient and more transparent supply chain of gold products, services and platforms that were more accessible to the consumer.

“The importance of Asia to the global gold market is now well established and likely to be cemented by recent developments in market infrastructure,” the WGC’s latest Gold Demand Trends' (GDT) report explained.

Hewitt highlighted the introduction of new products and trading platforms, including the Shanghai Gold Exchange International Board, the “Gold Send” mobile app in Turkey and the new kilobar contracts in Singapore and Hong Kong, as well as the Stock Exchange of Thailand’s intention to launch a physical gold exchange.

Further, in May 2014, gold refiner MMTC-Pamp became India’s first London Bullion Market Association-accredited refiner.

“The expansion of market infrastructure and proliferation of new products is supporting demand today, but it also has an eye on the future,” the report commented.

GOLD DEMAND DRIVERS
The GDT report showed a 10% decline in jewellery demand in 2014 to 2 153 t, which Hewitt noted was not a surprise given the jewellery demand surge in 2013.

Following a sharp drop in the second quarter of 2014, demand for gold jewellery gradually recovered in the fourth quarter to its strongest level since 2007.

Further, global demand had remained 5% above its five-year average.

The GDT noted a “standout” year for India’s jewellery demand despite government restrictions on gold imports, which, when lifted at year-end in a surprise move, sent the industry into disarray.

India reported its strongest year for jewellery demand – up 8% year-on-year to 662 t – since the WGC’s records began in 1995.

Despite China recording a 33% year-on-year decline in 2014, it remained the second best year for jewellery demand in the Asian country since 1995.

There was also strong jewellery demand in the UK and US, driven by improved economic performance, up 18% to 28 t and 9% to 132 t respectively.

Central bank demand also increased, rising 17% to 477 t in 2014, marking the fifth consecutive year and sixteenth consecutive quarter that banks were net buyers of gold.

“Central banks continued to see the value of gold as a reserve asset in 2014,” the GDT noted, pointing to a trend that was particularly visible in the fourth quarter of the year when demand was up 40% year-on-year to 119 t.

Meanwhile, investment demand increased 2% to 905 t during the year under review, despite a 40% plunge to 1 064 t of bar and coin investment. Exchange-traded fund outflows also slowed down significantly, from 880 t in 2013 to 159 t in 2014.

The report showed total supply in 2014 unchanged at 4 278 t, as recycling contracted to a seven-year low after an 11% decrease to 1 122 t, offsetting yearly mine production growth of 2% to a record 3 114 t.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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