Gold Demand 2023 Quarter 1

Gold Demand 2023 Quarter 1

Continued momentum in central bank buying and resurgent Chinese consumer demand con-trasted with a negative contribution from ETFs and weakness in India. Q1 gold demand (ex-cluding OTC) was 13% lower y/y at 1,081 tonnes (t). Inclusive of OTC, total gold demand strengthened 1% y/y to 1,174t as a recovery in OTC investment, consistent with investor posi-tioning in the futures market, offset weakness in some areas.

Demand from central banks experienced significant growth during the quarter. Official sector institutions remained keen and committed buyers of gold, adding 228t to global reserves. Bar and coin investment gained 5% y/y to 302t, concealing some large regional variations. In con-trast, net negative demand for ETFs, although modest at -29t, generated a hefty y/y decline compared with the sizable inflows seen in Q1’22.
Global jewellery consumption was virtually flat at 478t. Jewellery fabrication exceeded con-sumption as stock building added just over 30t to global inventories.

Gold use in the technology sector continued to suffer from the challenging economic climate. Demand slumped to 70t, the second lowest quarter in our data series back to 2000.

Modest growth in both mine production (+2%) and recycling (+5%) led to a marginal increase in Q1 total gold supply to 1,174t. The uptick in recycling was largely a function of higher gold prices.

The LBMA Gold Price (PM) averaged US$1,890/oz during the quarter, marginally higher y/y. The price was over 10% higher than the previous quarter’s average, almost matching the Q3’20 record high.

China saw a strong relief rally in the first post-COVID quarter of unfettered consumer spend-ing. The recovering domestic economy and healthy income growth reignited domestic con-sumption, while the eye-catching gold price performance spurred investment interest.

Indian demand fell sharply as local gold prices applied the brakes. Record high and volatile domestic gold prices discouraged both investment and jewellery consumption during the quarter.

Investment dominates the outlook for 2023. We continue to see healthy upside for investment this year, while the picture for fabrication (jewellery and technology) is more muted. Further robust central bank buying is expected, albeit below 2022’s record. Modest growth is likely in both mine production and recycling.