Gold demand reveals important changes in the global economy

Global gold demand in the first quarter of 2015 fell 1 percent to 1,079 tons, compared to the first quarter of 2014, when total demand was at 1,089 tons. However, the World Gold Council (WGC) still sees some improvement in the gold market despite an overall decline in demand in the first three months of the year. The slight downturn in gold demand shows that the market has entered some stability amid a 4 percent increase in investment demand.

In assessing regional demand, India showed a significant shift in gold consumption as it increased 15 percent from the first quarter of 2014. The rise in Indian demand came after the government lifted import restrictions at the end of the year. This trend is a reflection of the economic growth in India. However, China recorded a 7 percent decline in gold demand. However, this decline is not indicative, as demand in China was very strong in early 2014 and now skews the year-over-year comparison. Looking at five-year trends, Chinese demand is still very positive.

The jewelery sector is another bright spot for the gold market, especially in the US, where growth was around 4 percent. In the US, jewelry demand is growing year-over-year for the third month in a row. Jewelry demand in the UK also increased 4 percent in the first quarter, while jewelry demand in India rose 22 percent year on year.

The WGC expects that the increase in jewelry demand indicates that the global economy has begun to grow. Investment demand should also remain positive this year as investors assess the balance of risk in their portfolio and eventually return to gold as an important diversification tool. In addition, central banks are increasing official purchases of gold, a trend that is unlikely to change anytime soon. Net purchases totaled 119.5 tonnes during the first quarter.