Central Banks Big Buyers of Gold in 2014

Last week brought the release of the World Gold Council’s (WGC) Gold Demand Trends Full Year 2014 report, and the results are certainly interesting. 

Notably, the document states that while full-year gold demand dropped 4 percent from 2013, hitting 3,923.7 tonnes, investors should not necessarily be worried about the decline. That’s because “consumer demand was never likely to match the previous year’s record surge.”

Meanwhile, 2014 supply of the yellow metal came to a total of 4,278.2 tonnes, “virtually unmoved” from the 2014 number.

Breaking down those numbers, the report highlights demand trends from four key sectors: jewelry, technology, investment and central banks. Here’s brief look at highlights from each category:

• Jewelry: Q2 brought a big drop in gold demand from the jewelry arena, but the WGC notes that it recovered after that point, ultimately resulting in the strongest fourth quarter since 2007. That said, 2014 demand from the sector was still down 10 percent from the previous year, at 2,152.9 tonnes. 

• Technology: Demand from the technology sector took a big hit in 2014, coming in at just 289 tonnes, its lowest level since 2003. According to the WGC, the big drop was caused by “[s]luggish economic conditions in key markets and ongoing substitution away from gold.”

• Investment: By contrast, investment demand for gold rose in 2014, hitting 904.6 tonnes. That’s a 2-percent increase from the 2013 total of 885.4 tonnes. However, the WGC casts a damper on those stats by noting that “ETF outflows slowed to a fraction of the hefty 2013 total and therefore acted as less of a drag on investment.” Meanwhile, bar and coin demand amongst smaller investors sunk a whopping 40 percent from 2013′s overwhelming demand.

• Central banks: Central banks are a definite bright spot in terms of 2014 gold demand. They took in 477.2 tonnes of the yellow metal last year, the WGC states, in a continued effort to diversify away from the US dollar. In the last 50 years, central banks have only taken in a higher amount of gold in 2012. The Russian central bank was the biggest buyer, adding 173 tonnes to its stocks — the country is now estimated to hold 1,200 tonnes of gold, or 12 percent of overall reserves.

Another highlight of the report is the fact that India was able to reclaim the position of top gold-consuming country from China. Demand from the former came to a total of 843 tonnes, while for the latter it was 814 tonnes.

Looking forward to the future, the WGC anticipates that 2015 will bring an uptick in gold demand, with jewelry demand driving the rise. Investment demand is also expected to recover, and India and China are expected to take in 900 to 1,000 tonnes each of the yellow metal. Central bank demand is anticipated to sink to a still-healthy 400 tonnes.

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.