China and India remain the cultural heartlands of gold, generating 55% of global jewelry demand and 49% of global demand:
· India remains the largest country for demand with 933.4 tons, which is notable considering the volatility of the gold price and the weakness of the Indian rupee against the U.S. dollar during the second half of the year. Gold jewelry accounted for over 500 tons and the investment market demand reached 366 tons. Indian demand accounted for 25% of total bar and coin demand worldwide.
· In China, annual demand of 769.8 tons was up 20% year-on-year as a result of increases in both jewelry and investment. The largest rise was in investment, where demand of 258.9 tons with the value of RMB84.5billion leaped 69%. China jewelry demand increased every quarter of last year and was the largest single jewelry market worldwide for the second half of 2011.
There was also a surge in demand in Europe with the region posting its seventh consecutive annual gain to 374.8 tons. Germany and Switzerland were the main drivers of growth in the region as the Eurozone remains in turmoil and the need for asset protection continues to be a priority.
Central banks continued the trend established in 2010 of being net buyers of gold. Purchases by central banks soared from 77 tons to 439.7 tons. This reflects the need to diversify assets, reduce reliance on one or two foreign currencies, rebalance reserves and ultimately protect national wealth.
Marcus Grubb, Managing Director, Investment at the World Gold Council remarked, “What we can see from these 2011 figures is that there were two main factors driving the results: Asian growth and optimism on the one hand and Western desire to protect assets against uncertainty on the other. Looking particularly at Asia, there was a major boost to the overall figures from the increase in Chinese demand, which is a trend that we see continuing over the next year. It is likely that China will emerge as the largest gold market in the world for the first time in 2012. What is certain is that the long-term fundamentals for gold remain strong, with a diverse and growing demand base, coupled with constrained supply side activity.”
Gold Demand Statistics for 2011:
· On the supply side, gold mine production reached a new annual record of 2,809.5 tons, 4% up on 2010. Recycling was down 2% year on year to 1,611.9 tons, which when average price rises of 28% are taken into account, indicates that near-market supplies are drying up and that consumers may be holding on to their gold in the expectation of higher prices.
· Gold used in electronics was up 1.1% to 330.4 tons worth a record $16.7 billion, which is unexpected considering the increase in cost. Annual demand for technology as a whole was steady at 463.5 tons due to growth primarily in the Chinese market. The value of this tonnage increased dramatically by 28% to a record $23.4 billion.
· The value of jewelry demand in 2011 reached a new annual record of $99.2 billion. India and China continue to believe in both the intrinsic and emotional value of gold jewelry which explains why overall global jewelry demand was resilient despite high gold prices, difficult economic conditions, volatility and currency weakness against the U.S. dollar. Annual demand was 1,962.9 tons down 3% from 2010.
· One major element of fourth quarter investment relates to the significant increase of inflow into gold ETFs to 86.8 tons in Q4 2011 compared to just 22.3 tons in Q4 2010. The annual comparison is much weaker as inflows of 154 tons for 2011 are significantly lower than 367.7 tons for 2010, although this should be seen in the context of 2010 being an exceptional year.
· Demand for gold bars and coins continues to be robust and was another major contributor of the increase in investment demand, which climbed 24% to 1,486.7 tons.
· A record gold price of $1,895 per oz. was set on the London PM fix on Sept. 5 and 6, 2011.
Gold Demand Trends February 2012
