Gold demand for 2021 to be below pre-pandemic levels

London

DEMAND for gold from Asian countries and central banks has helped underpin price of the precious metal in the face of Western investment and speculative sales.

It is about a year since gold peaked at US$2,067 an ounce. For most of 2021, gold - currently priced at US$1,820 an ounce - has traded between US$1,677 and US$1,900.

Since the price has been relatively stable in the past three months and is currently 12 per cent below its peak, the demand for gold bars and coins has grown in Asia.

According to the World Gold Council's (WGC) latest Gold Demand Trends report, the total worldwide gold and coin purchases amounted to 594.5 tonnes in the first half of 2021.

This is higher than the 409.3 tonnes in the same period last year and 476.3 tonnes in all of 2019.

China and India are the two largest consumers of gold in Asia. Consumption would likely have been even better were it not for the terrible outbreak of Covid-19 in India earlier this year.

Although Singapore has a vibrant jewellery sector, its level of gold demand is relatively small.

According to the WGC, gold jewellery demand in Singapore jumped to 3.9 tonnes in the first six months of 2021, higher than the 2.7 tonnes in the same period last year but much less than the 5.5 tonnes in 2019, before the pandemic hit.

Gold coin and bar demand in Singapore was 2.3 tonnes in the latest period, slightly higher than 2020 and around the same levels as 2019.

Compared with last year, when central bank treasurers in Asia shunned gold when prices shot past US$2,000 an ounce, they have taken advantage of lower prices and have begun buying again.

In the first half of 2021, they bought 333.2 tonnes, the WGC said, which is 39 per cent higher than the five-year first-half average. The council noted "large-scale purchases" by Thailand, Hungary and Brazil.

During the gold and silver price boom between June and September last year, many investment banks were telling their clients to buy gold.

Such was the enthusiasm that 427.5 tonnes flowed into exchange-traded funds (ETFs) in the second quarter. But the price began to peak in August and then slide and ETF investors and hedge funds began to sell gold.

As at July 23, ETF gold holdings have fallen by 247 tonnes from last year's peak of 3,880 tonnes, although they are higher than the worst levels seen in 2021.

The WGC said it expected global jewellery demand for the full year to fall below pre-pandemic levels at around 1,600 to 1,800 tonnes.

The council forecast demand from investors - both in ETFs and bars and coins - at 1,250 to 1,400 tonnes for the full year, down from the numbers in 2020 but around its average over the last decade.

Gold jewellery demand in Singapore jumped to 3.9 tonnes in the first six months of 2021, higher than the 2.7 tonnes in the same period last year but much less than the 5.5 tonnes in 2019.