February 6, 2018 / 5:00 AM / 14 days ago

Gold demand slid to eight-year low in 2017 -WGC

    * Gold demand fell 7 pct to 4,071.7 T in 2017
    * Investment slid 23 pct as ETF buying declined
    * Jewellery buying rose for first year since 2013

    By Jan Harvey
    LONDON, Feb 6 (Reuters) - A late rally in physical gold
buying failed to prevent a drop in full-year demand last year to
its lowest since 2009, the World Gold Council said on Tuesday,
as weaker fund investment outstripped a bump in jewellery
consumption. 
    Global gold demand slid 7 percent in 2017 to 4,071.7 tonnes,
an eight-year low, the WGC said in it latest quarterly demand
trends report. 
    Investment demand fell by nearly a quarter, driven by
reduced inflows into bullion-backed exchange traded funds, the
gold mining industry-funded WGC said. While gold prices rose
last year on the back of dollar weakness, rising interest rates
and a surge in stock markets detracted from the metal's appeal
as an investment.
    "Certainly the higher equities and rising interest rates
will have prompted some investors to think about their
allocation to gold (last year)," the WGC's head of market
intelligence Alistair Hewitt said. "That said, lots of investors
are concerned about frothy asset prices."
    With monetary policy still loose in Europe, 73 percent of
new gold ETF investment last year flowed into European funds, he
said. "In Europe, you still had negative interest rates and
negative yields," he said. "You can contrast that with the
United States, where you had three rate hikes."
    Optimism over global growth, which helped drive the rise in
equities last year, also fed into stronger jewellery
consumption, he said. Jewellery demand saw its first annual rise
since 2013 despite a 13 percent increase in gold prices. 
    Indian jewellery demand, which saw particular weakness in
2016, rose 12 percent, posting its strongest fourth quarter
since the WGC started compiling data in 2000. In China,
jewellery demand rose 3 percent last year, its first annual
increase since 2013.
    Total Chinese buying stood at 953.3 tonnes last year, while
Indian demand reached 726.9 tonnes, the WGC said. It expects to
see buying at similar levels this year, with Indian demand seen
at 700-800 tonnes, and Chinese offtake at 900-1,000 tonnes. 
    Central banks also trimmed their overall purchases for a
fourth straight year. A drop in demand in the fourth quarter was
due entirely to Venezuela's $1.7 billion swap deal with Deutsche
Bank elapsing in October, the WGC said.
    This represents 45 tonnes of gold, it said, and was
accounted for in the fourth-quarter figures as a sale.   
    Demand from Russia and Kazakhstan stayed buoyant, while the
market also saw a rise in demand from Turkey. China, a strong
official sector buyer in recent years, was absent from the
market in 2017.
    This year central bank demand is expected to hold at 300-400
tonnes, little changed from 2017 levels, Hewitt said.
    
    WORLD GOLD DEMAND (T)*
    
                      2017        2016  Pct change
 Jewellery         2,135.5     2,053.6           4
 Technology          332.8       323.4           3
 Investment        1,231.9     1,595.5         -23
 - Bar & coin      1,029.2     1,048.7          -2
 - ETF               202.8       546.8         -63
 Central banks       371.4       389.8          -5
 TOTAL             4,071.7     4,362.2          -7
 
    *Source: World Gold Council, Gold Demand Trends FY 2017
    

 (Reporting by Jan Harvey, editing by David Evans)
  
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