Central banks increase gold purchases, jewelry demand drops

A recent report released by the World Gold Council said the global gold demand surged by seven percent year-on-year in the first quarter of 2019. Central banks showed strong interest in holding more gold reserves during the first three months, but individual purchasers eased their purchases, particularly of gold jewelry, especially in China.

The report said global demand for gold jewelry rose by just one percent in the first quarter, but demand in China dropped by two percent during the same period. Hangmin Baitai Jewelry Co., Ltd, a jewelry supplier situated at Southeast China's Zhejiang Province, saw sales drop after the Chinese New Year. The company's brand operations manager Zhou Yang said the sales were good on account of a hot marriage season in January, but dropped after that.

The slide is not only confined to jewelry. The World Gold Council's data showed that purchases of gold bars and coins by individual Chinese investors dropped by almost eight percent in the January-March period. The council's China managing director Roland Wang said the cooling demand stems from the good performance of China's equity market in the same period, which shifted investors' focus.

In China, we all know equity market performed especially well in the first quarter, so many investors focus on the equity market – that's very easy to understand, Wang said.

Central banks continued to show strong interest in gold purchases. More than 10 central banks bought nearly 150 tons of gold in the first quarter of the year, up 68 percent annually. Total world purchases over the past four quarters reached over 700 tons, a historic high.

The central banks still have to realize that their need to diversify their reserve assets from purely (relying) on the leading foreign currencies like U.S. dollar and Euro to other assets. Basically, gold is a No.3 reserve asset just behind the U.S. dollar and Euro. They realize the special role of gold in diversifying on the assets, added Wang.

Wang expected gold purchases made by central banks to increase in the following months, with individual buyers' interest varied allowing for the performances of other alternative assets.

(CGTN)