A 4 per cent increase in global gold demand was recorded in 2018 in the latest Gold Demand Trends report published by the World Gold Council. The rise has been attributed mainly to an increase in demand for gold from the world’s central banks.
Some 651.5 tonnes of gold were added to central bank reserves over the period, which was an astonishing 74 per cent increase on the amount they purchased in 2017.
What’s behind the trend?
Economic uncertainty often drives an increase in the demand for gold as a hedge or a diversifier within an investment portfolio. As well as the increase in central bank demand, the number of investors wanting to buy gold coins and gold bars also increased over the year, according to figures from gold retailers. Demand for gold coins and bars was up 4 per cent in 2018 to a total of 1,090.2 tonnes.
Alistair Hewitt, the World Gold Council’s Head of Market Intelligence, commented that the rise in demand is a result of economic and pollical uncertainty. He said: “Gold demand rose in 2018 and, although the US dollar gold price was down 1 per cent over the year, it outperformed many other financial assets.
“Worries about a slowdown in global growth, heightened geopolitical tensions, and financial market volatility saw central bank demand hit its highest level since Nixon closed the gold window in 1971, the volume of gold in European-listed ETFs reach a record high, and annual coin demand leap 26 per cent.
This is all to say that it’s now an incredibly interesting time for gold. Within the context of various geopolitical events taking place at the moment, we could well see a lot of activity in the gold market throughout 2019 and beyond.
Is it a global pattern?
Speaking on the topic, Mr Hewitt also commented that the pattern was the same across many regions of the world. He said: “Jewellery demand continued steadily with gold jewellery demand in China, Russia and the US increasing by 3 per cent, 9 per cent and 4 per cent respectively. This was in addition to the demand for more standard gold investment products, such as gold coins and bars.”
He added: “Exchange traded funds (ETFs) in Europe reduced their overall exposure to gold by 67 per cent over the year as a whole. However in the final quarter of the year, alongside signs of an end to economic growth and increasing stock market volatility, gold inflows increased to 112.4 tonnes, compared with just 32.5 tonnes in the same quarter of 2018.”
Mr Hewitt made it clear that gold is expected to continue to be a popular diversifier for investors in the year to come. He said: “I don’t see any of the risks that investors and central banks are worried about fading anytime soon and I expect gold to remain an attractive hedge in 2019.”
All this comes at a time when international investment banks are also predicting the value of gold to do well in 2019. Investors and collections, therefore, will be wise to keep tracking the changes in the market in order to make the most from the investment portfolios and any gold bullion and gold coins they choose to add to their collections.