JOHANNESBURG (miningweekly.com) – Global gold demand declined to 4 355.5 t in 2019, down 1% compared with 2018, the World Gold Council’s (WGC’s) latest ‘Gold Demand Trends’ report, published on Thursday, shows.

WGC member and market relations director John Mulligan says 2019 was “broadly one of two distinct halves”, the first half of which indicated resilience and growth across most sectors.

The second half, Mulligan tells Mining Weekly, was characterised by strong institutional investment and weakened consumer demand.

Central bank demand slowed in the second half – down 38% – in contrast with the first half’s 65% increase. However, the WGC says that this was partly owing to the sheer scale of buying that had been seen in the preceding few quarters.

Nevertheless, yearly buying still reached 650.3 t, the second-highest level for the 50-year period and only 6 t less than in 2018.

Gold-backed exchange-traded funds (ETFs) inflows bucked the general trend, with investment in these products holding up strongly throughout the first nine months of the year, reaching 255.5 t in the third quarter.

Momentum then subsided in the quarter thereafter, with inflows slowing to 26.4 t, marking a decline of 77% year-on-year.

The yearly supply of gold, meanwhile, increased by 2% to 4 776 t. However, the WGC says this growth came purely from recycling and hedging, considering that mine production slipped 1% to 3 436.7 t.

For the fourth quarter in particular, gold demand fell 19% to 1 045.2 t, compared with the same quarter of the previous year, which saw very strong demand. According to the council, two of the main contributors to the year-on-year drop in the fourth quarter total were jewellery demand and investment in gold bars, largely in response to the elevated gold price.

Mulligan says this relatively sharp rise in the gold price caused some investors to wait before investing further. For 2020, the gold price is expected to “remain relatively stable,” and might lead to an increase in gold bar investment.

Inflows into gold-backed ETFs and similar products pushed global holdings to a record year-end total of 2 885.5 t, with holdings having grown by 401.1 t over the year. Of this 401.1 t, 26.8 t were added in the fourth quarter.

Inflows had also been heavily concentrated in the third quarter of 2019, the WGC says, noting that this was owing to the US dollar gold price having rallied to a six-year high.

Accommodative monetary policies and global geopolitical uncertainties, along with momentum buying, were the main factors driving inflows in the sector during 2019.

Central banks were net buyers for a tenth consecutive year as global reserves grew by 650.3 t, down 1% year-on-year, marking the second highest yearly total for the last 50 years.

Central bank buying slowed during the fourth quarter, a decline of 34% year-on-year, although this was partly a reflection of the sheer scale of buying in 2018, Mulligan comments.

China and India – which, combined, accounted for 80% of the year-on-year decline in the fourth-quarter jewellery and retail investment demand – continued to hold sway over global consumer demand, and were down 10% and 16%, respectively.

Higher, and more volatile, gold prices as well as a softer economic environment were the main causes for this.

Following the outbreak of the Corona virus in China late last year, some concerns have risen in the market that the outbreak could hinder gold’s performance in this region, particularly on the back of market forecasts that suggest China’s economic activity will decrease on the back of the decline in oil prices.

Taking this into consideration, Mulligan tells Mining Weekly that “it is still too early” to make a prediction on how this crisis could affect the commodity, adding that its impact will depend on how the virus ultimately affects China’s communities.

Total yearly gold supply edged up 2% to 4 776.1 t, Mulligan adds, noting that an 11% increase in recycling was the main reason for the increase, as consumers capitalised on the sharp rise in the gold price in the second half of the year.

Yearly mine production was marginally lower at 3 463.7 t, marking the first yearly decline in over a decade.

The gold price, meanwhile, averaged $1 481/oz in the fourth quarter, the highest quarterly average since the first quarter of 2013.

Although the price remained below that of the third-quarter high of above $1 550/oz, the WGC says it “was well supported throughout the quarter”.

Gold prices in various currencies hit their highest levels in history.

In a separate statement, WGC market intelligence head Alistair Hewitt comments that demand for gold-backed ETFs had “surged in 2019 as investors sought to diversify their portfolios and hedge against uncertainty in other markets”.

He adds that these inflows, along with a sharp increase in futures positioning, saw the US dollar gold price reach a six-year high, despite retail investment and jewellery demand having sunk.

The latter, Hewitt notes, was partly owing to the rapid price rise in the second half of 2019.

“Looking ahead, we expect gold’s safe haven qualities to remain at the forefront of investors’ minds as they navigate global tensions, low yields and stretched equity valuations.”