The global demand for gold dropped significantly in 2013, even though consumers in China and India bought gold in record amounts throughout the year.

The global demand for gold dropped significantly in 2013, even though consumers around the world bought gold in record amounts in 2013, led by demand in China and India, with the US having a particularly robust year in the jewellery, bar and coin sectors. More importantly, China has become the world’s biggest gold market, according to the latest trend report from the World Gold Council.

Even though the gold market saw 21 per cent growth in demand from consumers, outflows of 881t from ETFs bought global gold demand in 2013 to a level 15 per cent below that of 2012, with a full year total of 3,756t. The report said that the outflows were caused by investors continuing to re-evaluate their portfolios in response to market conditions. This contributed to the 2013 average price of gold dropping to $1,411/oz, down 15 per cent on 2012.

“2013 has been a strong year for gold demand across sectors and geographies, with the exception of western ETF markets. Specifically, it was the year of the consumer. Although demand has continued its shift from West to East, the growing demand for gold bars, coins and jewellery is a global phenomenon,” said Marcus Grubb, managing director, investment strategy at the World Gold Council.
China sees record gold demand
This shift from West to East pushed gold demand in China and India to reach record levels in 2013 as consumer demand respectively rose 32 per cent to a record level of 1,066t and 13 per cent to 975t. This has essentially resulted in China becoming the biggest gold market during 2013, as consumer demand reached unprecedented levels.
According to the private investor gold market, BullionVault.com, gold is proving to be a versatile asset even following the serious dip the asset took in 2013.
"Investors buy when the economy’s weak, consumers when incomes are rising. Gold’s appeal as financial insurance has already come to the fore this year. China’s credit bubble troubles may well extend this 10 per cent rally," said Adrian Ash, head of research at BullionVault.com.
Notably, Chinese and Indian investment in gold bars and coins was up 38 per cent and 16 per cent, respectively, while demand for jewellery increased from 519t to 669t in China, and from 552t to 613t in India, reaching 2,209t globally, the highest figure seen since the onset of the financial crisis in 2008.
Bar & coin demand going strong

In comparison, the annual global investments in bars and coins reached 1,654t, up from 1,289t in 2012, a rise of 28 per cent, and the highest figure since the World Gold Council’s data series began in 1992.

In the US, bar and coin demand was up 26 per cent to 68t, and in Turkey it was up 113 per cent to 102t for the full year, demonstrating solid support on a global basis.
According to BullionVault.com, the rise in gold jewellery sales is a signal that US and UK consumption rose in 2013 for the first time in 12 years and marks a better time for the global economy.
“Together with higher mining costs, and the surge in Asian and especially Chinese demand, growing jewellery sales plainly put a floor beneath gold's crash. But what really moves gold prices higher or lower is investment demand, particularly from large "real money" investors,” explained Ash.
Looking at the macro side of the gold sector, the report also revealed that demand from central banks has decreased over 2013, as net purchases totalling 369t resulted in a 32 per cent drop compared to 2012. However, the council maintained that the banks remain strong buyers of gold, as the sector has seen 12 consecutive quarters of net inflows from such investors.