Demand for gold bars, coins up in Thailand while central banks stock up on precious metal

The council on Tuesday released its latest “Gold Demand Trends” report.

Shaokai Fan, the council head of Asia-Pacific (ex-China) and global head of central banks, told an online press conference that central banks had helped boost demand by adding 228 tonnes to global reserves. As a result, the first quarter of this year set a new high in this data series.

He noted that sustained and significant purchases from the official sector highlighted gold's role in international reserve portfolios during times of market volatility and heightened risk.

However, global gold jewellery demand remained relatively flat in the first quarter, totalling 478 tonnes. Demand in China saw recovery, reaching 198 tonnes in the first quarter of unrestricted consumer activity since the lockdown was lifted.

This scenario compensated for weaker demand in India, where consumption fell 17% year on year to 78 tonnes in the first quarter of 2023. The primary factor influencing purchases was the sharp rise in domestic gold prices.

Meanwhile, investment demand was mixed in the first quarter.

He pointed out that renewed gold-backed ETF (Exchange Traded Fund) inflows in March, driven primarily by systemic risk to the US economy, partially countered outflows in January and February and helped bring quarterly outflows down to a modest 29 tonnes.

Despite significant market shifts, gold bar and coin investment increased 5% year on year to 302 tonnes, particularly in the US market, he said.

According to the report, US bar and coin demand reached 32 tonnes in the first three months of the first quarter, the highest quarterly level since 2010. Fears of a recession and the need for a safe haven amid the banking turmoil is seen as prompting the demand.

"This increase helped offset weakness in Europe, particularly Germany where demand fell by 73%. This significant drop in German demand was primarily the result of positive real interest rates and a rise in the euro gold price, which encouraged profit-taking," Fan explained.

He said the first-quarter total gold supply increased slightly to 1,174 tonnes, with a marginal 1% increase in mine production and a 5% increase in recycling due to the higher gold price.

He added that the overall outlook for global gold demand this year remains positive, as high inflation, tight monetary policy, recession, and geopolitical tensions provide supportive factors for investors to hold some gold as a safe haven to protect their portfolio.

According to a World Gold Council report, consumer demand for gold in Thailand increased by 3% year on year to 3.9 tonnes in the first quarter, up from 3.8 tonnes in the same period last year.

He said the increase was due to a 15% year-on-year increase in local bar and coin demand to 1.9 tonnes, despite a 6% year-on-year decrease in local jewellery demand to 2.1 tonnes.

“Rising gold prices and cost of living pressures were behind the 6% year-on-year decline in Thailand’s Q1 jewellery demand. In fact, the surging gold price encouraged consumers to sell back existing holdings of old gold jewellery,” he explained.

Meanwhile, Louise Street, senior markets analyst at the World Gold Council, highlighted how gold's diverse sources of demand underpin its role and performance as a global asset.

He said that as different economic forces and demand drivers played out in the global gold market, growth in some regions offset weakness in others.

He added that gold's role as a long-term, strategic asset could take centre stage as some economies approach recession, citing gold's track record of delivering positive returns in five of the last seven recessions.