High gold prices and milder economic conditions were the main culprits of the recent decline in consumer demand.
The World Gold Council (WGC) notes that gold demand fell 1% in 2019 to 4,355.7 tons, as the huge influx of investment flows into ETFs and similar products was accompanied by lower consumer demand driven by prices.
Global demand in the second half of 2019 decreased by 10% compared to the same period in 2018 due to a decrease in demand for jewelry and investment in the retail trade of bullion and coins. The fall in the fourth quarter was the most significant: demand fell sharply by 19% compared to the same period last year to 1,045.2 tons.
China and India controlled global consumer demand, accounting for an 80% decline in the 4th quarter. The WGC attributes this decline to higher gold prices and a milder economic situation.
The demand of the central bank also slowed down in the second half of the year - by 38% compared with a 65% increase in the first half of 2019. However, the WGC indicated that the slowdown in purchases at the central bank was partly due to the sheer scale of purchases in the previous few quarters. For the tenth year in a row, central banks are still net buyers of gold with a total procurement volume of 650.3 tons - the second highest level in 50 years.
The influx into global ETFs and similar products backed by gold was contrary to the general trend. Investments were kept high during the first nine months of the year, reaching a crescendo of 256.3 tons in the third quarter. Impulse then decreased in the 4th quarter, inflow decreased to 26.8 tons - a decrease of 76% compared to the same period last year. However, investment stocks reached a record 2885.5 tons at the end of the year.
On the other hand, the total supply of gold increased by 2% to 4,776.1 tons last year. This growth came exclusively from an 11% jump in processing. Annual ore production decreased slightly, by 1%, to 3436.7 tons.
