COVID-19 pandemic fuels gold ETF and coin demand

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By Ellsworth Dickson

A new report by the World Gold Council – Gold Demand Trends Q1 2020 – pointed out that “As the scale of the pandemic – and its potential economic impact – started to emerge, investors sought safe-haven assets. Gold-backed ETFs (gold ETFs) attracted huge inflows (+298 tonnes), which pushed global holdings in these products to a new record high of 3,185 tonnes.”

Interestingly, the number of gold bar buyers dropped by 19% year-over-year while demand for gold coins was up 36% due to safe-haven buying by Western retail investors.

With stores closed and people locked down at home, “jewellery demand, unsurprisingly, was particularly hard hit by the effects of the outbreak; quarterly demand dropped 39% year-over-year to a record low for our series of 325.8 tonnes. The drop in jewellery demand was led by a 65% decline in China – the largest jewellery consumer and the first market to succumb to the outbreak. Technology demand also fell to a new low for our data series of 73.4 tonnes (-8% year-over-year).”

Central banks continued to buy gold in significant quantities, although at a lower rate than in Q1 2019: net purchases amounted to 145 tonnes (-8% year-over-year). The World Gold Council report remarked that “Russia announced that it would suspend its long-term buying program from April, signalling a sharp slowdown in global net buying.”

The virus also caused disruption to gold supply as some mines suspended operations while others operated at a diminished production rate. Mine production fell to a five-year low of 795.8 tonnes (-3% year-over-year).

Meanwhile, recycling ground to a near standstill towards the end of the quarter as consumers were confined to their homes.

The report noted that investment inflows helped push the US dollar gold price to an eight-year high. Consequently, global gold demand in value terms reached US $55 billion – the highest since Q2 2013. The price also reached new record highs in Indian rupees and Turkish lira, among others.

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