Global gold demand plummets 14% to 11-year low level in 2020

Global demand for gold plummeted 14 per cent in 2020 to an 11-year low of 3,759.6 tonne, showed the the World Gold Council’s latest ‘Gold Demand Trends’ report. It was the first time since 2009 that gold demand plunged below the 4,000 tonne mark.

India’s gold consumption is expected to rebound in 2021 after falling to its lowest in 26 years last year as pent-up demand and higher economic growth are seen boosting sales, the World Gold Council (WGC) said on Thursday.

Higher purchases by the world’s second-biggest bullion consumer could support gold prices, which hit a record high last year, although that could increase India’s trade deficit and weigh on the ailing rupee.

Coronavirus led-lockdowns slashed India’s gold demand by 35% in 2020 to 446.4 tonnes, the lowest since 1994, the WGC said in a report published on Thursday.

However, demand is expected to rebound in 2021 to around 2019 levels as economic growth is forecast to rebound helped by falling COVID-19 cases, said Somasundaram PR, the managing director of the WGC’s Indian operations.

India’s economy is seen growing 11.5% in 2021, the International Monetary Fund said on Tuesday.

“As lockdowns eased and normalisation efforts were phased in, imports in the December quarter rose 19% year-on-year, pointing to the positive impact of pent-up demand. This can be expected to continue into 2021,” Somasundaram said.

India’s gold imports of 164.4 tonnes in the December quarter were the highest in six quarters, fuelled by improving demand during the key Hindu festivals of Dussehra and Diwali, the WGC said.

India’s investment demand rose 8% in the December quarter on the year to 48.9 tonnes, its highest in two years, as people boosted purchases of gold coins and bars in expectations that bullion prices would rise further, Somasundaram said.

“We will see a sharp rise in investment demand. Amid low interest rates and higher stock prices, people are looking at gold to diversify their investments,” he added.

In rural areas gold demand in the last few months was robust following surplus monsoon rainfall that yielded a record harvest of summer-sown crops, the WGC said

While global demand improved steadily in Q4 from the severely depleted numbers in Q2, the coronavirus continued to impact consumer behaviour, it added.

The decline in annual demand is similar to the 28 per cent year-on-year (YoY) fall to 783.4 tonne in the fourth quarter of 2020, making it the weakest quarter since the midst of the global financial crisis in Q2, 2008.

Gold jewellery demand in Q4 fell 13 per cent Y-o-Y to 515.9 tonne, resulting in a full-year total of 1,411.6 tonne, 34 per cent lower than in 2019 and a new annual low for WGC’s data series, said its statement.

On the other hand, increased uncertainty and policy response to the pandemic supported annual investment demand, which increased 40 per cent Y-o-Y to a new high of 1,773.2 tonne.

“Most of the growth came in the form of gold-backed ETFs (gold ETFs) but was aided by bar and coin demand growth in H2. In addition, evidence suggests that over-the-counter (OTC) activity was also robust throughout the year,” said the World Gold Council’s statement.

However, in Q4 there was a notable decline in investment demand for gold ETFs with outflows at 130 tonne.

Total annual gold supply also took a hit and was 4 per cent lower y-o-y (4,633 tonne), the largest annual fall since 2013. The drop can be largely explained by coronavirus-related disruption to mine production, offset by a marginal 1 per cent increase in recycling to 1,297.4 tonne for 2020, as per the WGC.

Inflows into global gold ETFs reached an annual record of 877.1 tonne, valued at $47.9 billion. An 11-month consecutive run of positive inflows starting in December 2019 came to a halt in November when a recovery in sentiment and gold price drop led to 130 tonne of outflows in Q4.

The US dollar gold price returned 25 per cent in 2020 supported by investor demand. After reaching a record high in August across most currencies, the LBMA Gold Price PM dropped back to $1,762.55/oz at the end of November, before recovering to close the year at $1,887.6/oz.

Demand for gold bars and coins grew 10 per cent in Q4. A recovery in China and India in the second half of 2020 added to continued strength in Western markets to lift annual demand to 896.1 tonne, up 3 per cent.

Further, 2020 marked a record low of 1,411.6 tonne for gold jewellery demand. Despite a quarterly recovery in Q4, demand was unable to overcome the continued challenges presented by COVID-19.