Global gold demand dropped by 23 per cent during January-March quarter of this year to 815.7 tonne compared to the same period of 2020, mainly driven by outflows of gold-backed exchange-traded funds (ETFs) and low Central bank buying, according to a World Gold Council (WGC) report.
The overall gold demand stood at 1,059.9 tonne during the January-March quarter of 2020, according to WGC''s Gold Demand Trends Q1 2021 report.
The January-March quarter witnessed 71 per cent decline in investment demand at 161.6 tonne compared to 549.6 tonne in the same quarter of 2020, mainly on account of hefty outflows from gold ETFs.
During the quarter there was strong outflows from gold ETFs, which lost 177.9 tonne in the first quarter compared to 299.1 tonne in the corresponding quarter of 2020, as higher interest rates and a downward price trend of the precious metal weighed on investor sentiment, it said.
However, bar and coin investment went up by 36 per cent year-on-year to 339.5 tonne during the quarter under review as against 250.5 tonne, mainly on account of the opportunity to buy at lower prices as well as by expectations of building inflationary pressures, it pointed out.
Gold prices during the quarter softened to by 4.21 per cent to around USD 1,795 an ounce compared to USD 1,874 in the October-December 2020. However, year-on-year gold price stood at around USD 1,583 during January-March, up 13.32 per cent.
Meanwhile, central banks bought a net total of 95 tonne of gold in the first quarter compared to 124.1 tonne in the same period of 2020, 23 per cent lower, said the WGC report.
The Reserve Bank buying was slightly up at 18.7 tonne during the January-March quarter compared to 18 tonne during the same period of 2020.
The report further said that after the shock of 2020, jewellery demand recovered during the first quarter but remained subdued compared with previous historical levels.
Jewellery demand during the quarter was up by 52 per cent at 477.4 tonne compared with 313.2 tonne in the corresponding period of 2020, mainly due to recovery in India and China, it said.
"The jewellery demand recovered to witness a growth of 52 per cent is following rebound seen in every market, softer gold prices, festivals and weddings, pent-up demand and receding effect of the pandemic in China," WGC managing director, India, Somasundaram PR told PTI.
Demand for gold for use in technology was 11 per cent higher annually in the quarter compared to the same quarter the preceding year, as consumer confidence continued to recover.
Gold demand for technology during January-March was at 81.1 tonne compared with 72.9 tonne in the same period of 2020.
As countries around the world continue their recoveries, economies have started to cautiously re-open leading to an encouraging return in consumer confidence in the first quarter, as illustrated by the stellar rise in gold jewellery demand, WGC Senior Markets Analyst Louise Street said.
“Conversely, having seen investors take shelter in gold from the initial impact of COVID-19, Q1 2021 saw a sell-off in the gold price as confidence in economic recovery grew and US interest rates rose sharply.“Despite this, gold retains its relevance in well-balanced portfolios, especially with a risk of inflation looming. Looking ahead to the rest of the year, we see reasons to be optimistic about the gold market as its main drivers remain well supported,” she added.