Gold jewellery demand down 15% in 2016

Demand for gold jewellery across the globe fell 15% in 2016, despite an overall rise in demand for gold.

The World Gold Council’s (WGC) latest Gold Demand Trends report found global demand for gold rose 2% in 2016 to 4,309 tonnes – the highest level since 2013.

Demand was largely driven by inflows into gold-backed Exchange Traded Funds (ETFs) of 532 tonnes – the second-highest year on record – as investors responded to concerns over future monetary policy, geopolitical uncertainty and negative interest rates.

Continued global economic and political uncertainty, most notably Brexit, the US election and currency weakness in China, boosted overall investment demand by 70% to a four-year high of 1,561 tonnes.

Despite the increase in demand for gold it was predominantly investment led, with demand for gold jewellery falling 15% throughout the year to 2,042 tonnes.

Alistair Hewitt, head of market intelligence at the WGC, commented: “2016 saw an unprecedented degree of political upheaval, which underpinned huge institutional investor flows into gold.

“With an equally uncertain political and economic environment likely in 2017, we expect investment demand to remain buoyant.”

The two leading gold markets, India and China, both experienced a drop in consumer buying in 2016, falling 21% and 7% respectively.

In China, jewellery demand was dampened due to high gold price throughout much of the year, coupled with constrained levels of supply in Q4.

Meanwhile, Indian demand also faced a raft of challenges throughout the year, including regulatory changes, culminating in the demonetisation policy which “severely hampered” demand in both the jewellery and retail investment sectors.