ETF Gold Demand Soars While Consumer Demand Slows

ETF Gold Demand Soars Title Image

ETF gold demand from investors has soared over the past year. The unprecedented fiscal and monetary stimulus were rolled out to tackle the effects of COVID-19. However, consumer demand, particularly but not surprisingly, jewellery demand slumped.

What’s in store for gold demand fundamentals for 2021?

Increased consumer demand in China and India will help support the gold price in 2021. There is little doubt that investment demand – especially into Exchange Traded Funds (ETFs), similar products was the main driver of the gold price higher in 2020. According to World Gold Council data, total ETF demand surged 120% from 398.3 tonnes in 2019 to a new record high in 877.1 tonnes in 2020. However, consumer demand, comprised of jewellery plus bar as coin demand declined a significant 22% in 2020 from 2019. Jewellery demand was hit hardest with a decline of 34%.

Looking back to 2020, the first chart below breaks down gold demand in 2020 by sector. Jewellery comprised 38% of demand in 2020, Physical Bar along with Coin 24%, and so on. The smaller chart shows the percent of consumer demand for the top 10 countries, which comprise 67% of total consumer demand. In 2020 China and India accounted for 46% of consumer demand.   

Gold Demand in 2020 Pie Chart

China’s consumer demand in 2020 was 28% lower than in 2019, along with 54% below the 2013 peak.

The Optimistic Approach

Turning to the outlook for 2021. UBS now forecasts China’s economy to grow more than 9% in 2021, the fastest growth in a decade. This is raised from initial estimates of the growth of around 8.2% due to the increased exports as the result of the $1.9 billion US fiscal package passed this week. The updated UBS forecast also expects, Chinese GDP is likely to expand more than 19% this quarter. When compared to the first three months of 2020, when the nation was in lockdown. This rapid economic growth will boost gold demand to 2019 levels.

The WGC Council reports that their “fieldwork indicates an optimistic attitude among major jewellers in China. Who experienced strong sales in recent months. The main reasons behind the more positive outlook over the coming months are:

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Adam Sundler 2 weeks ago Member's comment

Thanks for the share Stephen.