Demand for gold falls into four categories:
- central bank purchases;
Overall demand – at 4,212.2 tonnes – was approximately the same in 2015 as in the previous year. Jewellery accounted for 57% of the total in 2015; the investment category represented approximately 20%.
The first half of 2015 was challenging for the industry, with gold consumption falling by 6% year-on-year (1). This weak performance was the result of a number of factors:
- extreme weather conditions negatively influenced demand from the Indian jewellery sector;
- economic slowdown and financial market turbulence led to lower jewellery demand in China;
- reduced in demand from the Middle East as a result of low oil prices; and
- currency fluctuations affecting demand in several countries, including Russia and Turkey.
Though we do not expect substantial demand growth for gold in the short-term, we do not expect a fall either, for the following reasons:
- Modest economic growth in the world, including the US, the Eurozone and China.
- An anticipated recovery in investor confidence around the US markets, amidst signs of economic recovery and an upsurge in US share prices.
- The current relative low level of the gold price which acts as a support, stimulating consumer demand, particularly from the jewellery segment.
- Demand for gold from emerging markets, especially from China and India, is growing, albeit at a slower rate.
In addition, a more positive outlook for the US economy, combined with the expectation of federal interest rate rises and higher risk appetite, negatively influenced global investment demand.
During the second half of the year, however, demand rose across most sectors – except technology. In H2 demand was up by 6% year-on-year and 7% above H2 2013, with the most significant growth coming from investment demand. Net purchases by official institutions and central banks also accelerated in H2 2015. The People’s Bank of China, for example, announced that it had accumulated over 600 tonnes of gold during the preceding six years.
|2015||2014||YoY Change||YoY Change, %||2015||2014||YoY Change||YoY Change, %|
|Central banks/ other institutions||588.4||583.9||4.5||1%||21.9||23.8||-1.9||-8%|
|Total gold demand||4,212||4,226||-14.0||0%||157.1||172.1||-15.0||-9%|
Global demand for gold in jewellery declined by 3% year-on-year, though the picture was mixed. While performance during the first half was weak, the third and fourth quarters combined produced the strongest second half-year total for gold jewellery in 11 years.
Jewellery demand in Turkey, the Middle East and Russia suffered from economic factors, but pricesensitive consumers in India and China took advantage of lower prices. In 2015 as a whole jewellery demand in India grew by 5% year-on-year, and reached 654.3 tonnes, the highest level since 2010. November and December were particularly upbeat as the start of the Diwali festival and the wedding season was immediately preceded by a drop in the gold price. In China gold jewellery demand was also quite resilient in the face of slowing economic growth. However, the total annual Chinese demand was down 3% year-on-year to 783.5 tonnes.
Central banks and other institutions
Central bank net purchases for 2015 were 588.4 tonnes – 1% higher than 2014 – with demand again stronger in the second half of the year. Economic and political risks continued to worry global markets and prompted a greater interest in gold as a part of a portfolio of reserves. Russia, for the second year in a row, was the leading net purchaser, with full-year purchases (at 206 tonnes), significantly higher than the 173 tonnes acquired in 2014.
Weak oil prices and ongoing geopolitical risks have prompted greater use of gold for risk- management purposes. China, which began regularly reporting purchases in July, bought 103.9 tonnes in H2 2015, having announced that it had accumulated 604 tonnes over the preceding six years. Another active player was Kazakhstan, which purchased 30 tonnes of gold during the year. Jordan significantly raised its gold reserves, by 21.8 tonnes, in the first three quarters of 2015.
Net sales were insignificant compared to purchases. Two Latin American countries, El Salvador and Colombia, sold 5.4 tonnes and 6.9 tonnes respectively, as result of economic pressures. Germany was another seller and sold 3.2 tonnes under its coin-minting programme.
Top-10 reported official gold holdings (as at December 2015)
|Tonnes||% of reserves|
|1. United States||8,133.5||72%|
In 2015 investment in gold was up 8% year-on-year, from 815.4 tonnes to 878.3 tonnes. Annual growth in bar and coin demand expanded marginally, and the regional pattern of demand was similar to jewellery gold demand. Bar and coin demand grew in India and the US, while it declined in Russia, Turkey and Middle East. The most significant improvement was seen in the Greater China region and China was the largest single market for bar and coin demand. Although annual demand, at 201 tonnes, was well below the 2013 record of 406.7 tonnes, it was nevertheless 21% up year-on-year. The weakness of the yuan, which raised the market concern over an economy prospects, was a key driver in this market, while concerns over the stock market provided additional support.
ETF – exchange-traded fund – flows were less negative in comparison with the previous period, which was positive for the demand. As a whole, ETF outflows were 133.4 tonnes in 2015 compared with 185.1 tonnes in 2014. In early 2016 it seems investor interest in gold-backed ETFs has started to grow as the market seeks wealth preservation/risk diversification instruments.
Gold demand in the technology sector represented around 8% of total gold consumption in 2015 at 330.7 tonnes – a reduction of 5% year-on-year.
Gold is used, for example, in the electronics sector, wireless sector, bonding wire and dentistry.
As the gold price remained higher than US$1,000 per ounce, technology companies opted for gold substitution and chose cheaper materials.
The global economic slowdown has also impacted demand for final products in key sectors.
- (1) Unless otherwise indicated, indicators’ source: World Gold Council. Gold Demand Trends. Full year 2015.