Gold Demand Rose 7% In Q1 2019. A Launching Pad Higher For Gold?

In May, the WGC published a new edition of its quarterly report on gold demand. It features interesting data about the changes in gold demand and supply. What does the Gold Demand Trends Q1 2019 say about the gold market in the first quarter of the year? How will its conclusions be reflected going forward in the gold price?

WGC Publishes Report on Gold in Q1 2019

According to the newest WGC data, the supply of gold was virtually unchanged (modest growth in mine production and recycling were offset by a decline in hedging), while the gold demand rose 7 percent year-over-year to 1,053.3 tons in the first quarter of 2019.

The main driver of the increase were strong central banks' purchases. The central banks bought 145.5 tons of gold, 68 percent more than one year ago. Low-interest rates and uncertainty caused by trade wars pushed reserve managers' appetite toward gold. However, Russia - which is not in a typical country's position (Its purchases are motivated by strong political and economical reasons at the same time. This way, it's shielding itself from tougher sanctions.) - was again the largest buyer.

When it comes to other categories, jewelry demand edged up 1 percent, thanks to India. Technology demand declined 3 percent, hit by slower global economic growth and trade dispute between China and the U.S. Bar and coin investment fell 1 percent, while investors allocated 40.3 tons of bullion to gold ETFs, which means a huge boost from 27.1 tons in Q1 2018. The inflows were supported by the dovish shift in the US monetary policy.

If we talk about gold ETFs and similar products, let's point out that - according to the WGC's market update from April - in Q1 2019, assets in European gold-backed exchanged trade products (ETPs) hit a record high, reaching 1,121.4 tons and accounting now for 45 percent of the global ETP marketNegative interest ratesstock market volatility, Italian turmoil, and geopolitical uncertainty including Brexit, fueled the European flight to gold.

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