GFMS: Global gold demand tumbled by 24% in Q1 2016

NEW DELHI (Scrap Monster): The quarterly Gold Survey 2016 report for Q1 2016 released by GFMS Thomson Reuters indicates that global gold demand tumbled by 24% during the quarter. The demand totaled 781 tonnes during the initial three months of the current year. The severe drop in demand was mainly on account of the slump in demand in key Asian consumers including China and India. Q1 reported weakest gold demand in almost seven years, GFMS report noted.

The sharp rally in gold prices during the quarter led to reduced gold buying in Asian countries. Incidentally, gold prices had rallied nearly 17% during the quarter to hit the highest level of $1,270 per Oz. This is the biggest quarterly increase in gold prices in nearly 30 years. The rapid rally in gold prices dented the demand for gold, as consumers postponed their gold purchases in anticipation of a cool-off in high prices. GFMS notes that Indian jewellery demand hit 8-year lows during the first quarter, falling sharply by 56%. The Chinese jewellery consumption fell 28% during the three-month period.

According to its latest ‘GFMS Gold Survey 2016: Q1 Update and Outlook’, the gold prices are likely to fall back in the short term on the back of slump in demand from Asian region. Prices are likely to ease further if fears about global economy continue to abate. A correction in gold prices to sub-$1,200 per Oz levels will aid a recovery in demand from the east, which will keep the prices well above the cyclical lows. The demand recovery is likely to happen later in the year. Thereafter, gold prices may resume their bull run to around $1,300 per Oz towards end-2016.

The GFMS report also noted that gold mine output has dropped marginally by 0.4% to 733 t during the first quarter of the year. Also, global gold hedge book rose by 7% to 7.39 million ounces during Q1 2016. The scrap gold market ended in surplus supply of 310 t during the quarter.