Global demand for gold fell last year as investors piled into stock markets instead, cancelling out the first annual increase in purchases of gold jewellery in four years and the increased use of the precious metal in smartphones and car electronics.
Demand for gold fell by 7% year on year to just over 4,000 tonnes in 2017, the first fall since 2015, according to a report from the World Gold Council, which represents gold miners. Gold averaged $1,257.2 an ounce over the year, down 1% from 2016.
Alistair Hewitt, head of market intelligence at the World Gold Council, said: “It’s not surprising to see overall gold demand down given the backdrop of monetary policy tightening and strong equity markets in 2017, but the market is not in bad shape.”
Central banks added 371 tonnes to their gold reserves last year, down 5% from 2016, with Russia and Turkey being strong buyers. Purchases of gold bars and coins were down 2% to 1,029 tonnes globally. The US had its worst year since 2007, with sales of bullion coins dropping sharply, partly because investors were lured to the S&P 500 index and other stock markets as they reached new highs.
Against this decline in investment, demand for gold from individuals and technology firms increased. Consumers in China, India and the US bought more gold jewellery as those economies improved, leading to the first annual increase in jewellery sales since 2013. Demand rose by 4% to 2,136 tonnes.
Younger people now prefer to buy well-designed, lighter pieces made from lower-carat gold, often featuring coloured gems. That trend, which first emerged in Europe and the US, has been catching on in China, the world’s biggest buyer of gold jewellery. “It’s all about branding and design rather than big, thick pieces,” said Hewitt.
Nearly 333 tonnes of gold went into technology such as smartphones, laptops and cars last year, up 3% – the first annual increase in demand from the industry since 2010. Gold bonding wire is used in memory chips and sensors in next-generation smartphones, powering 3D video, virtual reality and facial and gesture recognition. Gold is also used in car safety features such as collision avoidance LED sensors.