Net gold purchase by central banks hits six-year low in Q1 2017

SEATTLE (Scrap Monster): The latest Gold Demand Trends Report released by the World Gold Council (WGC) for the initial quarter of the current year suggests significant fall in purchase of gold reserves by central banks across the world. The net purchases during the quarter totaled 76.3t, touching the lowest quarterly purchases during the past six years. When compared with the corresponding quarter last year, the central bank gold purchases have declined sharply by 27%. The net purchases had totaled 104.1t in Q1 2016. Also, net purchases declined by almost a third over the prior quarter.

According to WGC, Russia and Kazakhstan were among the few active buyers of gold in Q1 2017. Russia’s gold reserves have increased by 64.9t to 1,680.1t. The share of gold in country’s total reserves surged higher to 17% during the quarter. Kazakhstan too has increased its gold holdings by 9.6t in Q1. The country has reported net purchases of gold during the past 54 months in a row. On the other hand, China’s gold purchases remained flat. Gold holdings by China accounted for 2.4% of total reserves during the quarter, which is the highest share since early 2000s.

A few countries reported net gold sales during Q1. Jordan and Qatar reported net sales of over 3t each. The other countries to reduce their gold holdings during the quarter were the Czech Republic, Mexico, Mongolia and Mozambique. Meantime, Argentina and Hungary reportedly conducted swaps of gold during recent months. Argentina reported swap transactions totaling 6.9t, whereas Hungary lent 3.1t in swap transaction.

Meantime, the inflows into gold-backed ETFs and similar products totaled 109.1t in Q1 this year, declining sharply by 68% when matched with 342.1t during the corresponding quarter in 2016. The total Assets under management (AUM) in gold-backed ETFs was worth just over $90 billion by the end of the quarter. The inflows into European ETF products totaled 92.4t, accounting for bulk of investment. US-listed products recorded addition of 14.1t. The minimal outflows during the quarter suggest that sentiment has turned positive towards gold-backed ETFs.

The total bar and coin demand surged higher by 9% from 264.9t in Q1 ’16 to 289.8t in Q1 this year. The demand in China was up sharply by 30% to 105.9t during the quarter. Also, India’s bar and coin demand soared 14% to touch 31.2t, mainly on account of the seasonal rise in demand during the Chinese New Year, which fell in the month of January this year. The demand had totaled only 27.5t during the first quarter of 2016. However, data suggests that the country’s demand continue to remain at historically low levels. The market is expected to recover during forthcoming quarters as the demonetization effects reduce.

The European bar and coin market was up by nearly 9% at 60.8t during the first quarter of 2017. Germany reported the strongest growth during the quarter. The German market recorded 13% jump in bar and coin demand. The demand totaled 34.3t. The other countries to report decent growth during the quarter were Switzerland, Austria and the UK. On the other hand, the US demand declined nearly one-fifth to 16.2t in Q1 ’17. The rise in gold prices resulted in many retail investors selling their gold holdings into the secondary market, WGC noted.