Gold Demand Climbs; Central Banks Buying the Most Since 1964

Gold Demand Climbs; Central Banks Buying the Most Since 1964
February 19, 2013

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)

Central banks around the world bought 534.6 tons of gold in 2012, the most since 1964, according to the World Gold Council, an international gold industry organization.

In a report released in February, the World Gold Council said global gold demand hit a record dollar-value level in 2012, at $236.4 billion.

Purchases by central banks climbed 17 percent compared with 2011, with purchase activity accelerating as the year went on. Fourth-quarter purchases of 145 tons were nearly 30 percent higher than central bank purchases of gold in the fourth quarter of 2011. This marked the eighth consecutive quarter in which government central banks were net purchasers of gold, the report notes.

‘From Net Sellers to Net Buyers’

“Central banks’ move from net sellers of gold, to net buyers that we have seen in recent years, has continued apace. The official sector purchases across the world are now at their highest level for almost half a century,” said Marcus Grubb, managing director of investment at the World Gold Council, in a statement.

Total global demand for gold—including central bank purchases, private investor purchases, and purchases in the jewelry and technology industries—rose 4 percent to 1,195.9 tons in the fourth quarter of 2012 compared to a year earlier. Average selling price was a record $1,721.8 per ounce. The average price during 2012 was $1,669.0 an ounce, up 6 percent from the average price in 2011.

China, India ‘Gold Powerhouses’

“China and India remain the world’s gold powerhouses, and by some distance, despite challenging domestic economic conditions. In India, consumer sentiment towards gold remained strong despite measures aimed at curbing demand, reaffirming gold’s role in Indian society. In an underdeveloped financial system in India, gold has an important role to play,” Grubb said in his statement. “Despite the turbulent macroeconomic climate throughout the year, as well as the regional uncertainties affecting India and China, the two largest gold markets, annual demand was 30 percent higher than the average for the past decade.”

Other key findings from the report:

  • In India, full year demand was down 12 percent from the previous year, but the market performed strongly in the final quarter with total demand at 261.9 tons, an increase of 41 percent over the same period last year. Both jewelry and investment demand reached their highest levels in six quarters. Demand for jewelry was up 35 percent year-on-year, reaching 153.0 tons, and strong retail demand led to 108.9 tons of investment buying. The prospect of duty increases, which came into force in January 2013, may have added to strong buying in the final quarter to beat the anticipated price rises.
  • Demand in China was flat year-on–year, reflecting the impact of the economic slowdown. In Q4, however, total demand was up 1 percent over the previous quarter, to 202.5 tons.
  • Global investment in Exchange Traded Funds in 2012 was up significantly, by 51 percent over the preceding year, though Q4 was down 16 percent, to 88.1 tons, when compared with the high levels recorded in Q3 2012.

Internet Info

“2012 sees gold hit record value level,” World Gold Council: http://www.gold.org/media/press_releases/archive/2013/02/gdt_q4_2012_pr/

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)