Thai gold demand plummets
High prices drive consumer purchases down 54% in first quarter, says World Gold Council
YLG gold bars on display. Gold buyers in Thailand tend to be price sensitive, according to the World Gold Council.
Consumer demand for gold in Thailand fell 54% year-on-year to 3.8 tonnes in the first quarter, from 8.3 tonnes in the first quarter of 2021, as high prices weighed on sentiment, according to the World Gold Council ( WGC).
The weak performance of the Thai consumer market contrasts with the overall positive trend in gold investment around the world, the WGC said in its latest report on gold demand trends.
Global non-OTC demand in the first quarter rose 34% year-on-year, driven by strong flows into exchange-traded funds (ETFs), reflecting gold’s status as a safe-haven investment in period of geopolitical and economic uncertainty. .
The decline in Thailand was largely due to a 74% year-on-year decline in total investment in bars and coins, from 6.2 tonnes in the first quarter of 2021 to 1.6 tonnes in the first quarter of 2022, said the WGC. However, jewelry demand increased by 8% to 2.2 tons over the same period.
Thai consumers tend to be price sensitive, and with high local prices many investors have chosen to lock in their profits. Anecdotal evidence in Thailand also suggests that retail gold bullion products continue to face significant competition from paper gold products.
“While not yet at pre-pandemic levels, the 8% year-over-year increase in jewelry demand can be explained by the reopening of the economy and the recovery tourism,” said Andrew Naylor, regional general manager for Asia-Pacific (formerly China). ) at the WGC.
“Consumers, however, are still holding back buying big-ticket items, opting instead to lock in profits from the sale with the recent price spike.”
Geopolitical crises weighed heavily on the global economy and revived investor interest, briefly pushing the price of gold to US$2,070 an ounce in March, just below its all-time high of 2,074.88 $ established in August 2020. Prices have since fallen back below $1,900.
Gold ETFs recorded their largest quarterly inflows of 269 tonnes since the third quarter of 2020, which more than reversed the annual net outflow of 173 tonnes from 2021 and partly due to higher prices of gold.
Demand for gold bars and coins in the quarter was 11% above its five-year average at 282 tonnes. However, further lockdowns in China and high prices in Turkey contributed to a 20% year-over-year decline, compared to the very strong first quarter of 2021.
In the jewelry sector, global gold demand fell 7% year-on-year to 474 tonnes, mainly due to weaker demand in China and India. Despite a strong performance in China during the Lunar New Year period, this was later dampened by the Covid outbreaks in February and March, resulting in strict shutdowns.
In India, the decline in the number of marriages and the absence of auspicious days in the first quarter had a direct impact on gold purchases in the country. This, coupled with rising gold prices around the world, has prompted many Indian consumers to hold back on purchases.
Gold demand in technology hit a four-year high of 82 tonnes, up 1% from the first quarter of 2021. Although the sector has seen modest growth, it has not been exempt from challenges. Major financial and industrial centers such as Shanghai have been subjected to further shutdowns, which has affected the electronics supply chain.
Net purchases by central banks more than doubled from the previous quarter, adding more than 84 tons to official gold reserves during the first quarter of 2022, with purchases in the sector being dominated by countries such as Egypt and China. Turkey. While buying was 29% lower than in the first quarter of 2021, central banks continue to value gold’s performance in times of uncertainty, the WGC said.
The total gold supply in the first quarter increased by 4% year-on-year. This was boosted by strong mining production, which reached 856 tons. Additionally, recycling increased by 15% over the previous year, reaching 310 tonnes in response to higher gold prices.
“The first quarter of 2022 has been turbulent, marked by geopolitical crises, supply chain challenges and runaway inflation,” said Louise Street, senior analyst at the World Gold Council for Europe, the Middle East. and Asia.
“These global events and market conditions have reinforced gold’s status as a safe haven, not only for investors but also for retail consumers thanks to its unique position as a dual nature asset class. .
“Given current market dynamics, investment demand is expected to remain strong as the combination of high inflation and heightened geopolitical tensions will likely fuel demand for gold among investors.
“On the other hand, consumers are facing a global cost of living crisis, which means many will reconsider how they spend their money. As consumer demand recovers from the weakness inflicted by Covid, the Continued growth in jewelry demand could be stifled by rising costs and a general economic downturn.”