Global gold demand in question as China, US slow

Otmane El Rhazi from The Bullion Desk.

Global gold demand fell one percent in the first quarter, but the yellow-metal has found recent support from the pull-back in the dollar and an injection of capital from the China’s central bank (PBoC).

Gold demand fell to 1,079.3 tonnes from 1,089.9 tonnes in the year-ago quarter and was three percent below the five-year average, according to the World Gold Council (WGC).

China accounted for a seven percent drop on their own as the economy there slowed to the lowest level in 24 years.

Juan Carlos Artigas, WGC director of investment research, believes gold demand will rebound.

“The long-term trend in China is very positive because it is expanding,” Aritgas told FastMarkets in a telephone interview. “If there was a slowdown, you could see pullback in consumption but you could still see growth in investment side.”

In the US, poor first quarter data is now weighing on the dollar, which today was at the lowest level since January 21.

This downward trend helped push gold to a two-month high as market participants hedged their positions.

The strong dollar earlier this year created a collection of shorts in the gold market, but the string of poor data has led to some adjustments in the market positioning.

“Attitudes in US have changed somewhat towards since last year for various reasons,” Aritgas said. “If you look at the beginning of 2014, investors were more bearish.”

Artigas mentioned how the tepid growth will “probably slow down the pace at which the [Federal Reserve] will raise rates”.

While Russia is small market on the consumption side, falling crude prices have dampened the economy and demand there.

“The economy was faced with much lower oil prices last year and so far this year which means less growth…less money in people’s pockets,” Aritgas said. However, “central banks continued [to buy gold] in Q1 2015, Russia being one of them”.

“Long-term, the consensus is they they will continue to grow and that is positive for gold,” Artigas added.

(Editing by Tom Jennemann)

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