US trend underpins demand for paper gold

In the first quarter of 2018, global demand for gold fell by 7 per cent, primarily due to decreases in the investment sector. By contrast, demand for gold jewellery remained largely unchanged at 487.7 tonnes, with the temporarily weaker demand in India being offset by increased jewellery purchases in China. At the same time, the positive trend in demand for gold in the technology sector continued with some 82.1 tonnes, a 4 per cent increase. Central bank demand for gold leaped upward by a whopping 42 per cent or 116.5 tonnes in Q1 2018. Total demand for gold was 973.5 tonnes, the weakest first quarter since 2008.

US investors’ interest in paper gold, already emerging in 2017, continued in 2018. However, this was not enough to compensate for the weak demand in almost all other regions of the world. Overall, global demand for paper gold fell by 66 per cent compared to the previous year. Also, demand for physical gold decreased by a total of 15 per cent.

Xetra Gold bucked the negative trend in Q1

While European demand for gold-based ETFs and ETCs also weakened significantly, Xetra-Gold was able to expand its position as the leading ETC in Europe. By mid-April 2018, Xetra-Gold had reached a new high of 177.4 tonnes of gold holdings, while demand for physical gold in Europe had fallen by 39 per cent. 

Since the beginning of Q2 2018, however, demand for gold-based ETFs and ETCs has increased significantly. With the positive US trend continuing, European demand is also picking up speed. In the first three weeks of April alone, there were inflows equivalent to 70 tonnes of gold.