Gold is bombing with demand from investors and consumers down 18% in the first three months of the year.
The price for an ounce is holding up compared with a year ago, but fewer people want to buy the precious metal.
The spot price is US$1.22, compared to $1.23 at the start of May 2016.
Market view
Figures from trade body the World Gold Council for activity in the first quarter of 2017 revealed:
- Gold-backed exchange traded funds were down a massive two-thirds compared to the money flowing in a year ago, with investors from Germany and Britain leading the way
- The trade in gold bars and coins was slightly up (9%)
- Demand for jewellery was at a standstill, only supported by gains in India. The figures showed a 1% year-on-year increase, with the two main markets showing widely different results – India was 16% at 92 tonnes, while China was 2% down at 176.5 tonnes.
- Central banks held back from bolstering reserves with gold – notably in China, where the People’s Bank paused purchases. The banks only bought 76 tonnes, but were also reluctant to sell.
- Technology demand was stagnant as well – up just 4% year-on-year. However, a rising demand for wireless smartphone charging should see an increase in demand, says the council.
Total global demand for gold was 1,032 tonnes – down 12% compared to the first quarter of 2016.
Mining set to decline
In detail, mining stayed the same at 764 tonnes, a modest change from 768 tonnes a year earlier.
“Having plateaued in recent years, mine production will soon enter a period of decline. The production profile of currently operating mines shows a relatively steep drop-off over the next five to 10 years. Even factoring in high-probability projects highly likely to reach commercial production, the fall in production is still significant,” said the council report.
The blame is placed on low capital investment and a lack of new gold discoveries.
“While there are signs of renewed interest in brownfield development and extending the life of existing mines, these are not yet sufficient to offset the steep cuts in project development spending of recent years. Inevitably, the supply pipeline will be squeezed,” said the report.
