Demand for Gold
Demand for gold has been growing at a significant rate since the 1970s, sparked by new uses, new social trends, and ongoing changes in local market conditions. The breadth of uses and span of demand for gold is now more diverse than it’s been in any point in history, with consumers and investors continually evolving and extending the demand for gold into new sectors, countries and for new uses.
Sources of Gold Demand
Demand for gold varies tremendously in the modern world, with both consumers and investors all jockeying for supply of this ancient commodity for varying purposes.
Jewellery & Other Industries
While demand for gold jewellery has fallen in some parts of the world, this traditional industry is still the single largest sector for gold demand. Nearly 50% of all gold that is mined is eventually refined for rings, necklaces, bracelets, earrings and other accessories. India is a key market here, with the traditional wedding season and Akshaya Tritiya particularly noteworthy. In 2019, sales of gold were reported to be as much as 30% higher than in previous years, as the nation rides a wave of economic strength and development. The Economic Times suggested that demand for gold was so great this season (2019) that it could in fact lead to an increase in global gold prices. The growing appetite for gold in India has been widely noted by industry experts and is considered to be a very positive driver of demand.
Technology and innovation
While jewellery has been a traditional market for gold consumption since time began, many modern industries are also increasingly embracing the precious metal, creating new avenues of demand worldwide.
As a result of technological development, alternative uses for gold are becoming increasingly popular. We’re particularly seeing an increase in the use of gold in medical, engineering, technological and environmental industries, meaning diversity in gold demand is becoming increasingly notable.
To date, gold has been used as a drug delivery system in humans, in plastic production, in dentistry, and even in air and water purification.
New Uses for Gold
In the future, it can reasonably be expected that gold will play a more significant role in visual displays (namely touchscreen devices) and in the ever expanding and changing field of data storage. Gold has also shown to have great potential in the future of ‘implantable’ electronics which can be placed inside the body to monitor and track health, or inside clothing in a bid to generate energy.
Investment & Central Bank Demand
Demand for gold is rife within the financial industry, particularly from Central Banks and private investors. However, these are relatively new sources of demand. While Central Banks were once a significant source, much of the reserves were sold between 1987 and 2009, with just under 8000 tonnes being sold within this period. However, these banks have been showing an ongoing trend for purchasing and holding greater reserves over the past few years, with more than 3000 tonnes purchased between 2010 and 2016. More recently, late 2018-19 saw a surge in Central Bank demand from a growing number of emerging nations – in fact, the largest increase in gold reserves is six years was recorded in May 2019.
Private investment is still very much a source of demand although gold currently accounts for less than 1% of portfolios. However, with a growth of at least 235% over the past 30 years, it is expected that demand from investors will continue to grow, especially as it is understood that gold could be instrumental in protecting against unfavourable stock market changes. The Gold Demand Trends Q1 2019 report confirms this, showing a 5% year-on-year growth.
A global commodity
Geographically speaking, the east has the largest appetite for gold on the planet and combined, this part of the world accounts for the greatest source of gold demand. It’s interesting to note that both Asia and the Middle East typically demand higher carats on average than any other market sector.
Demand from the east is understood to be the result of increased wealth within the region’s many emerging economies, and in an effort to ensure continuation of both traditional and cultural practices. In India, for example, around 600 tonnes of gold is made into locally hallmarked jewellery each and every year, with around 22,000 tonnes in total owned by households across the country.
In addition to being a status symbol in a country that is becoming more affluent – the nation is predicted to accelerate GDP growth to become the fifth largest economy in the world in 2019 and the second largest in Asia-Pacific by 2025 – it’s also historically and culturally significant.
Gold in India has long been held as a store of value, with jewellery often purchased as an investment, especially in poorer communities. Gold features heavily too in many religious festivals and traditions and is a key part of wedding rituals.
Like India, China has social, cultural and financial links to gold – it’s an intrinsic part of the Chinese New Year celebrations for example and a traditional gift to commemorate the birth of a child. It’s also a religious mainstay, dating back to the Han Dynasty in 206 BC and often used in worship of Buddha. Culturally too gold is significant, with many younger generations believing that gold investment is a demonstration of being wise and financially aware.
In the USA, gold is a relatively new status symbol, with gold jewellery not taking off until around the time of the Second World War. Today, demand focuses on designer accessories such as rings, bracelets and watches rather than token pieces. Many American consumers consider gold a long-time store of wealth and will invest in good quality gold jewellery with an intention to pass it on to future generations.
Befitting of a nation that unites east and west, Turkey’s demand for gold mirrors that of sides of the divide. It’s long held a position as a commodity with gold coins first introduced and used here. It’s also part of modern Turkey, a core part of wedding ceremonies and traditions, used as a currency and measurement and enduringly popular with people looking for a safe haven for their savings.
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