Global Gold Demand Grew By 4% in 2018

Global gold demand grew by 4% in 2018, driven by a multi-decade high in central bank buying, according to the World Gold Council’s Gold Demand Trends 2018 Report.

Gold demand came in at 4,345.1 tons in 2018. That was up from 4,159.9 tons the previous year. This was in line with the five-year average growth.

Central banks accumulated 651.5 tons of gold last year. Russia led the way. As the WGC put it, the Russians are “de-dollarizing” their reserves. The Russian central bank bought, 274.3 tons of gold in 2018, funded by the almost total sale of its US Treasuries portfolio. It was the fourth consecutive year of plus-200 ton growth. In February 2018, Russia passed China to become the world’s fifth-largest gold-holding country.

Central banks in Turkey and Kazakhstan were also big buyers of gold. China announced an official increase in its reserves for the first time in over two years last month. We even saw increases in gold reserves from two EU banks – Hungary and Poland.

The WGC noted that 2018 marked the highest level of annual net central bank gold purchases since the suspension of dollar convertibility into gold in 1971, and the second highest annual total on record.

Despite a decade passing since the global financial crisis, times seem no less certain. Central banks reacted to rising macroeconomic and geopolitical pressures by bolstering their gold reserves. These actions are consistent with a recent survey commissioned by the World Gold Council: 76% of central banks view gold’s role as a safe haven asset as highly relevant, while 59% cited its effectiveness as a portfolio diversifier. And almost one-fifth of central banks signaled their intention to increase gold purchases over the next 12 months.”

ETF gold holdings grew by 68.9 tons. While this represents a healthy increase, it was down significantly from 206.4 tons in 2017. Inflows into European-based funds drove global growth last year. In contrast, North American funds saw net outflows. You can read more about 2018 ETF gold inflows and outflows HERE.

Retail investment in gold bars and gold coins grew by 4% in 2018, driven primarily by a surge of investment in the fourth quarter as stock markets tumbled. Coin demand reached a five-year high of 236.4 tons, the second highest total on record. Demand for gold bars held steady at 781.6 tons, the fifth year in succession of holding in a firm 780 to 800-ton range.

Jewelry demand was virtually unchanged, dropping about 1 ton from last year. Gains in China, the US and Russia offset sharp losses in the Middle East. Indian gold jewelry demand remained stable at 598 tons.

Gold used in technology climbed marginally to 334.6 tons in 2018. That ranks as the highest demand level since 2014. But Q4 demand in the technology sector fell off due to slow growth in some major economies and dampened electronics demand due to the trade war.

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