GLOBAL gold demand was stable in the first three months of 2020 as a decline in jewellery purchases caused by COVID-19 lockdowns was offset by an increase in gold stockpiling by distressed investors, said Reuters.
Investors tend to turn to gold for its immutable wealth characteristics during times of economic and financial distress. For example, the $2.3Tr stimulus package announced by the US Federal Reserve in the first half of April sent investors to tangible wealth, such as gold bullion.
Cited by Reuters, chief market strategist for the World Gold Council, John Reade, said of the disruption caused by COVID-19: “This is the biggest change to the market that I can remember. It’s very clear that you ain’t seen nothing yet”.
Gold-backed exchange traded funds (ETFs) added a 298 tons of gold worth some $16bn to their hoard, said Reuters which cited first quarter WGC data. At the same time, use of gold in jewellery dropped to 325.8 tons, down 39% from the first quarter last year. This was the lowest quarterly demand for jewellery in at least a decade. Bar and coin sales fell 6% to 241.6 tons and purchases by central banks slipped 8% to 145 tons.
All in all, total demand was 1,083.8 tons, up 1% from 2019, the WGC said.
“There’s a lot of potential for investment demand to be strong. Whether it turns out to be big enough to compensate … remains to be seen,” said Reade.
Gold supply of gold fell to 1,066.2 tons in the first quarter a 4% decline from 2019, with both mined and recycled production decreasing, the WGC said.
COVID-19 containment measures will likely disrupt mine supply in the second quarter but scrap supply should increase, said Reade.
Gold prices have risen to eight-year highs above $1,700 an ounce this year, and hit record levels in other currencies including the euro, yuan and rupee, said Reuters.