Gold demand fell 15pc in 2013 on US recovery
OVERALL gold demand slid by 15 per cent in 2013, despite 21 per cent growth in demand from consumers, according to a new report by the World Gold Council yesterday.
Interest from the retail market was offset by large-scale outflows from exchange traded funds (ETFs) as confidence in the US economy improved, the report said.
Investors traditionally buy gold in times of financial uncertainty.
“The main feature of gold investment throughout 2013 was the contrast between ETFs, which acted as a source of supply to the market as sizable institutional positions were sold – a decline of 880.8 tonnes – and demand for bars and coins, which surged to an all-time high of 1,654.1 tonnes,” the report said.
“Notwithstanding the surge in bar and coin purchases, annual investment demand was down 50 per cent in 2013.”
The fall in demand had a direct effect on the price of the yellow metal, plummeting from around $1,700 (£1,018) per ounce to $1,200 per ounce at its lowest last year. This in turn wiped significant value off gold mining stocks in 2013, as well as hitting high street pawnbrokers such as Albemarle and Bond.
London-listed gold miners such as Randgold Resources, African Barrick Gold and Centamin have all seen their share prices decline in line with the gold price.
“ETF outflows had the most significant impact on the share price of gold miners last year,” Hunter Hillcoat, analyst at Investec, told City A.M.
“But very resilient retail demand has supported the gold price to some extent. Now we are starting to see some evidence of ETF inflows and the gold price is on the up again.”
ETFs only make up around six per cent of the market but have a large effect on pricing.
At their peak in 2012, ETFs had holdings of 84.6m ounces, worth $75bn, making them the world’s fourth largest holder of gold after the US and German central banks and the IMF.