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Central bank gold demand slides to near 6-year low in Q1 -WGC
May 4, 2017 / 4:03 AM / in 7 months

Central bank gold demand slides to near 6-year low in Q1 -WGC

    By Jan Harvey
    LONDON, May 4 (Reuters) - Central bank gold demand hit its
lowest in nearly six years in the first quarter as Chinese
buying dried up, the World Gold Council said in a report on
Thursday, feeding into an 18 percent year-on-year drop in
overall demand. 
    The official sector added just 76 tonnes of bullion to its
holdings in that period, the industry-funded WGC said in its
latest Gold Demand Trends report, down by more than a quarter
from a year before and the lowest of any quarter since Q2 2011. 
    China, a major official sector buyer of gold in
recent years, has held off making any additions to its reserves
since October, the first time it has done so since it started
releasing quarterly reserves data in 2015.
    A focus on capital outflows may have been weighing on the
Chine2se central bank's interest in gold, the WGC's head of
market intelligence Alistair Hewitt said.
    "China's forex reserves have declined significantly over the
last 18 months, edging beneath $3 trillion at the start of this
year," he said. "At the same time gold as a percentage of FX
reserves has increased. That is partly a function of the decline
in FX reserves and also the increase in the gold price." 
    The WGC is forecasting central bank purchases of 250-350
tonnes this year, he said, down from 377 tonnes in 2016. Russia
and Kazakhstan are expected to remain buyers of gold. 
    The first-quarter drop in central bank buying fed into an 18
percent fall in global gold demand to 1,034.5 tonnes, the
weakest first quarter since 2010, the WGC said. 
    Investment in gold-backed ETFs slipped back from the
previous year's record levels, though it held firm at 109
tonnes, versus selling of 193 tonnes in the previous quarter. 
    Balancing that, global jewellery consumption, the single
largest demand segment, was a touch higher, while coin and bar
demand rose 9 percent.
    Chinese consumer demand edged up 8 percent to 297.3 tonnes
as higher coin and bar demand offset softer jewellery offtake,
while Indian demand also rose 15 percent to 123.5 tonnes as the
impact of demonetisation eased, releasing pent-up demand.
    Chinese demand is forecast to reach 900-1,000 tonnes this
year, against 913 tonnes last year, while Indian consumption is
forecast at 650-750 tonnes, against 660 tonnes in 2016, the WGC
                         Q1 2017  Q4 2016   Q1 2016
 Jewellery                 480.9     625.7    474.4
 Technology                 78.5      84.5     76.4
 Bars and coins            289.8     374.9    264.9
 ETFs                      109.1    -192.8    342.1
 Central banks              76.3     108.5    104.1
 TOTAL DEMAND             1034.5    1000.8   1261.8
 Source: World Gold Council, Gold Demand Trends Q1 2017

 (Reporting by Jan Harvey, editing by David Evans)

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