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Gold demand declines in Q1 due to ETF outflows

Gold demand declines in Q1 due to ETF outflows

Mubasher: The overall demand for gold declined during the first quarter (Q1) of the year by 23% year-on-year (YoY) to 815.7 tonnes, recent data suggests.

The World Gold Council’s latest Gold Demand Trends report showed that the lower demand was driven by hefty outflows in gold-backed exchange-traded funds (ETFs), as the investors’ sentiment was impacted by expectations of higher interest rates.

Gold-backed ETFs saw 177.9 tonnes of outflows. However, the effect of this drop in ETF demand was mitigated by the strength of bar and coin demand.

Such retail gold purchases reached 339.5 tonnes, with a 36% YoY growth influenced by price-driven bargain-hunting and widespread concern over growing inflationary pressures.

In addition, the value of purchased gold jewellery by retail consumers rebounded to 477.4 tonnes, showing a 52% annual increase, compared with weaker demand in the corresponding period of last year ahead of the coronavirus (COVID-19) pandemic.

Accordingly, gold prices decreased by 10% in Q1, after surging to record highs in August 2020.

The report also indicated that global official gold reserves expanded by 95.5 tonnes, declining by 23% on an annual basis and growing 20% on a quarterly basis.

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,” Louise Street, Senior Markets Analyst at the World Gold Council, commented.