Demand for gold grew by 4% in 2018 – from 4,159.9t in 2017 to 4,345.1t – and is in accordance with the 5-year average of 4,347.5t. The annual growth was primarily driven by a record increase in central banks’ demand for gold.

Central Bank – Gold purchases from central banks soared to 651.5t from 374.8t in 2017. This is the highest since the dollar-to-gold convertibility was suspended in 1971, and the second highest net purchase on record.

Kazakhstan, Russia, and Turkey were still the biggest buyers even though their share of the total purchases drastically fell from 94% to 58%. Notable purchases were made by Hungary, which increased its gold reserves by 10 times in Q4 to 31.5t, and Poland, augmenting its reserves by 25.7t.

Other significant components of the 2018 demand were purchases by India (40.5t), Mongolia (22t), Azerbaijan (14.3t), China (10t), and Iraq (6.5t).

Gold Bars and Coins – Global demand in bars and coins climbed 4%, reaching 1,090t. While sales of bars were stable at 781.6t, the official coin market soared by 26% to 236t. The falling price of gold in Q3 and intensified market volatility in Q4 boosted gold bar and coin retail investment.

Growth in this sector was attributed to Southeast Asia where annual demand rose by 10% in Indonesia, 9% in Vietnam, and 7% in Thailand. Combined purchases from these three countries was 131.3t, which is 82% of the whole region’s bar and coin market.

In the Middle East, the demand shot up to 87.1t from 43.2t in 2017. Almost all of this increase was due to Iran, where the demand ballooned by 42.6t.

Gold-Backed ETFs – A weak global stock market in Q4 resulted to inflows into ETFs and similar products amounting to 112.4t. This reversed the outflows of 104t in Q3. However, the annual investment total of 69t was a decrease of 67% from 2017.

The only region that posted a net tonnage rise in 2018 was Europe, where AUMs in European-listed funds increased by 10%.

Technology – A 1% growth in the technology sector resulted to a four-year high of 334.6t. This increase was driven by the continuing electrification of vehicles and a strong consumer electronics market.

Although annual demand grew, quarterly demand fell for the first time in Q4 2018 since Q3 2016. Ongoing trade dispute, rapidly changing economic landscape, and weakening demand from LED, wireless, and memory sectors dampened gold purchases from the electronics industry.

Jewellery – Annual jewellery demand for gold was stable at 2,200t but Q4 demand dropped 3%, reversing Q3 gains. Demand from China grew by 3% while that of the US recorded an increase of 4%. Growth in these markets compensated for the drop in the demand from the Middle East.

Supply – Total supply of gold grew marginally from 4,447.2t in 2017 to 4,490t in 2018. Although mine production in China, South Africa, Peru, and Indonesia plunged, significant increases in Papua New Guinea, Russia, and Australia resulted to global production, hitting a new high of 3,347t. Gold recycling was also up 1%, with a total of 1,173t.

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