Q2 might reflect what Q1 did not for gold!

Notable in Q1 remained a lack of gold sales 

Q1 gold demand (excluding OTC demand) slipped 5% y/y to 1,102t, due to continued ETF outflows. Inclusive of sizable OTC buying by investors, total gold demand increased 3% y/y to 1,238t – the strongest first quarter since 2016. Q1 saw no let-up in the pace of central bank gold buying: 290t (net) was added to official holdings, only part of which is currently reflected in IMF data.

Bar and coin demand matched the previous quarter at 312t, translating to a 3% y/y increase. Global gold ETF holdings fell by 114t. Europe and North America both saw quarterly outflows, slightly countered by inflows into Asian-listed products. US listed funds saw a positive shift late in the quarter. The jewellery sector was healthy, given the price rally.  

Global jewellery consumption was just 2% lower y/y at 479t. Jewellery fabrication grew by 1% y/y to 535, resulting in inventory build of 56t during the quarter. Technology demand for gold recovered 10% y/y as the AI boom boosted demand in the electronics sector.  

Although a whisker away from a new record and comfortably beating our initial – tempered – 2023 forecast, we remain cautious as we look ahead. The multi-year trend of net central bank buying appears established, but there may well be some central banks willing to wait on the sidelines in response to the recent price surge.  

Equally, opportunistic sellers may be more likely to get drawn out with the stellar rise in prices so far this year. The March slowdown in monthly reported buying could signal some reticence by reserve managers to accumulate at these levels, despite unreported buying showing no such restraint.  

A lack of sales was also notable in Q1, but given the late quarter price run-up, Q2 might reflect what Q1 did not; as is likely the case in other demand categories!