Global bar and coin investment in Q1 matched the previous quarter at 312t, translating to a modest 3% y/y increase. Gold price action helped to maintain buoyant demand, which came in 17% above its five-year average of 268t.
As previously noted, Western and Eastern markets tend to see contrasting trends in gold investment. And while this quarter was no exception, there was something of a turnaround in their respective behaviour. Typically, investors in Eastern markets are more responsive to price and will tend to react to a sharp rise by sitting on the sidelines (waiting for a pause or corrective pullback in the price as an opportunity to buy) and/or by taking profit and cashing in on their gold investments. Western investors have historically been attracted to a rising price and tend to buy into the rally.
The most recent quarter has seen these roles reversed: investment demand in Asia and the Middle East has shown considerable growth, unaccompanied by a marked increase in profit-taking/selling back. In contrast, investors in the US and Europe have taken a different approach. While investment demand for gold bars and coins remains healthy, it has been countered by strong profit-taking from investors keen to realise gains on their gold holdings as the price reached successive record highs.
Bar and coin demand in China jumped to 110t in Q1, an increase of 68% y/y and the strongest quarterly total for more than seven years. Value preservation needs, seasonal gifting demand and the outstanding gold price performance attracted investors.
A weaker local currency during the first two months of the year, together with concerns over volatility in the property and stock markets (mainly in January), led Chinese investors to seek value preservation, and spurred demand for gold. Chinese New Year-related purchases added to demand, with investors showing a strong appetite for dragon-themed gold bars and coins.New Delhi Investment
The staggering gold price rally in March also attracted investors who are faced with a range of poorly-performing alternative investments. And continued announcements of official gold purchases by the People’s Bank of China further underscored the positive view of gold, among both small-scale ‘average’ investors and larger-scale, high-net-worth investors.
In the face of a soaring gold price the local premium eased during March, but the average Q1 premium was the highest ever for a first quarter, at US$40/oz, providing further evidence of the strength of investment buying in China.
China’s bar and coin investment should remain healthy over coming quarters. China is likely to continue its path of easing monetary policy to support the country’s economic recovery. And gold should therefore remain attractive to local investors as yields trend lower. Investor interest will also likely be sustained by continued weakness in the housing market and ongoing global geopolitical tension, as well as continued central bank gold buying. That being said, any sharp increase in gold price volatility may deter investors, while any speed bumps in China’s economic growth could also impact household budgets and the capacity to buy gold.
Q1 saw healthy levels of gold bar and coin investment in India, up 19% y/y at 41t. This was on a par with Q1 2022, which was itself the strongest first quarter since 2014.
In a repeat of the pattern seen in India during Q4’23, demand was sparked by the price correction in February, which investors expected would be temporary and would presage a reboundLucknow Stock. The subsequent sharp price rally reaffirmed those positive price expectations. Investors bought into the rally as the price reached successive record highs, anticipating a continued uptrend.Kolkata Stocks
The strength in bar and coin investment echoed sentiment elsewhere in India’s gold market. ETFs saw positive Q1 inflows (+2t), and two new funds were launched during the quarter, indicating continued growth in these products.Jaipur Investment
While investor sentiment towards gold remains positive, the domestic general election, which runs from April to June, may keep demand subdued. Data shows that gold consumption tends to decline ahead of such elections, particularly as there is greater scrutiny on the movement of gold and cash.
Any further sharp rises in the gold price could present a short-term headwind by sparking profit-taking and may result in a reduction in volumes purchased due to affordability constraints.
Gold investment demand in Turkey remained greatly elevated at 44t. Bar and coin investment was up 50% on the previous quarter – despite the rocketing domestic price – although the y/y comparison showed a 12% drop from last year’s record quarterly high. To put Q1 demand tonnage into context, it stood at 89% above the 24t five-year quarterly average. And in lira value terms, demand was a record-breaking TR91bn, compared with TR58bn in Q1’23.
The ongoing environment of extreme inflation, domestic political tension, global geopolitical volatility and negative real interest rates continued to fuel investment for gold as a safe haven and inflation hedge.Kanpur Stock
Demand remains lofty despite continued restrictive quotas, limit the official permissible volume of bullion imports to 12t per month. The result has been to drive up local premiums to more than US$200 in March, having ranged between US$50-100 for the earlier months of the quarter.
Bar and coin investment in the Middle East region of 26t was 15% lower y/y, from the very high base of Q1’23. Demand was little changed from the previous quarter and 35% ahead of its five-year average of 19t.
Iran, the largest bar and coin market in the region, saw continued healthy demand against a backdrop of heightened regional tension. Investment in the quarter reached 12t and premiums roughly doubled, to around 10-15% by the end of March. Nonetheless, the y/y comparison shows an 11% decline, reflecting the strength of demand seen in the first quarter of 2023.
Investment demand in the UAE cooled 10% y/y as investors waited for a pause or correction in the soaring gold price. Nonetheless, safe haven motives provide a solid foundation for demand in this market.
Jaipur Wealth Management