London: Gold demand dropped to a five-year low as record prices and a slowing US economy reduced purchases in every application for the metal except investment funds, the producer-funded World Gold Council said.
Global use of 701.3 tonnes in the first quarter, down 16% from a year earlier, was the lowest since the start of 2003, the London-based council said in a report on Tuesday. The only growth was in China, Russia, Vietnam and Egypt. In India, the biggest user, consumption fell 50%.
Purchases by large investors helped gold reach a record $1,032.70 (Rs44,096) an ounce on 17 March. Investment in exchange-traded funds such as StreetTracks Gold Trust was 72.9 tonnes, double the pace of a year earlier. Prices have dropped 14% since the high and demand in India for the Akshaya Thritiya festival on 7 May fell 11% from a year earlier, council figures show.
“We still think demand will be down in the second quarter,” Jill Leyland, economic adviser to the council, said in a phone interview on Monday. “Even if the price stayed where it is now, it would take a while for consumers to get confident again.”
Global jewellery purchases were 445.4 tonnes, down 21% from a year earlier, according to the report using figures from London-based research company GFMS Ltd. Jewellery and coins and other retail investment demand declined 25% in Turkey and Saudi Arabia. Consumption climbed 15% in China and Egypt, 9% in Russia and 71% in Vietnam.
In Vietnam, demand was buoyed as more banks marketed gold as an investment, Leyland said. In Egypt, there was a “very strong belief that gold prices were going to rise further,” she said.
China’s usage of 101.7 tonnes was close to the 102.1 tonnes total in India. In the fourth quarter, China was the largest user.
“I doubt that demand in China will beat demand in India on an annual basis any time soon,” Leyland said. “Both have strongly growing economies and the Indian population is growing more rapidly.” India has been the largest buyer of gold since at least 1997, she said.
Spending on jewellery, coins, investment funds and other items rose 20% to $20.85 billion, the second highest ever after $21.1 billion in the third quarter, the council said. New York pension fund TIAA-CREF and London-based Horseman Capital Management Ltd were among the purchasers of StreetTracks in the first quarter, regulatory filings show.
Gold supplies increased 11% to 901 tonnes as metal from recyclers climbed 30% and central bank sales were 8% higher. Mine production dropped 3%.