The Asia Miner

JUL-SEP 2018

The ASIA Miner - Reporting Important Issues to Mining Companies in the Asia Pacific Region

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the asia miner • volume 15 • issue 3 10 FEATURE: All that glitters is gold Gold performance since 2001 in various currencies DEMAND The recently published World Gold Council's (WGC) Gold Demand Trends Q1 2018 report shows global gold demand falling 7 per cent year-on-year (y-o-y), to sele at 973.5 tonnes. With demand at its lowest for the first quarter since 2008, the World Gold Council aributes the decline to a "fall in investment demand for gold bars and gold-backed ETFs, partly due to range-bound gold prices." "Although demand was down year-on-year, we saw encouraging levels of jewellery demand in China, the US and Europe, conঞnued growth in the technology sector, and steady inflows into ETFs, albeit at a slower pace than last year," said Alistair Hewi, Head of Market Intelligence at the World Gold Council. "Solid inflows into central bank reserves also highlight the ongoing relevance of gold as a strategic asset for insঞtuঞonal investors." The total supply of gold increased by 3 per cent in Q1 2018 to 1,064t, due to increased mine producঞon and net hedging. Mine producঞon and recycling levels both saw fracঞonal increases com-pared with Q1 2017, at 770t and 288t respecঞvely. The key findings include: Global jewellery demand flaened at 488t, down 1 per cent on Q1 2017. Demand in China was buoyed by holiday demand, and US demand conঞnued to improve in response to the supporঞve economic backdrop. In contrast, Indian consumers were discouraged by rising gold prices, exaggerated by a weakening rupee, with demand down 12 per cent compared with 2017. "This was the third weakest quarter in India's jewellery market for ten years as a depreciaঞng rupee magnified the rise in the internaঞonal US dollar gold price," reported the World Gold Council. China, Germany and the US drove weakness in bar and coin investment, with global demand falling 15per cent to 254.9t. The range-bound gold price undermined investor interest in these markets. In China, the world's largest bar and coin market, demand fell 26 per cent y-o-y largely due to concerns regarding the strength of the yuan, which saw investors gravitate to gold 12 months ago to protect their wealth. Since March 2017, the yuan appreciated by approximately 9 per cent, which has eased investor concern. ETFs saw their fi[h consecuঞve quarter of inflows. Holdings grew by 32t, due solely to growth in North America. Investment in the first quarter was mixed, with rising interest rates on the one hand, and a sharp spike in stock market volaঞlity on the other. As gold prices were relaঞvely subdued, many investors lacked a clear signal. "The environment during the first three months of 2018 was more varied: a relaঞvely stable gold price and rising interest rates contrasted with sharp equity market volaঞlity and periods of heightened geopoliঞcal risk to create mixed signals for gold investors," stated the World Gold Council. Central banks added 116t to global official reserves in Q1 2018, a 42 per cent increase y-o-y. This was the highest Q1 total for four years and in line with average quarterly purchases since Q1 2010 of 115t. Russia, Turkey and Kazakhstan again dominated the list of central banks buying gold, adding 91t between them. Demand for gold in the technology sector conঞnued to improve, up 4% on Q1 last year. The wireless sector was a key area of growth as 3D sensors for facial recogniঞon were increasingly deployed in smartphones, gaming consoles and security systems.

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