Investors Pick Physical Gold Over ETFs In Q1; Comex Registered Silver Just Hit A Fresh All Time Low

Tyler Durden's picture

According to an update in gold demand trends released by the World Gold Council earlier, Q1 saw a divergence in purchasing intentions in the gold market as investors focused on physical and shunned paper instruments such as ETFs. Per the WGC: "Global gold demand in the first quarter of 2011 totalled 981.3 tonnes, up 11% year-on-year from 881.0 tonnes in the first quarter of 2010. In value terms, this translated to US$43.7bn, compared with US$31.4bn in the first quarter of 2010, an increase of almost 40%. This was largely attributable to a widespread rise in demand for bars and coins, supported by an improvement in jewellery demand in key markets. On the other hand, ETFs and similar products witnessed net outflows of 56 tonnes ($2.5bn). Redemptions were concentrated in January. Despite the outflows, the collective volume of gold held by global ETFs by the end of the quarter was in excess of 2,100 tonnes equating to more than $95bn. It is useful to realize that ever more investors see gold as not so much a speculative product, and merely as an intermediary between a fiat start and endpoint, but as a wholesale alternative to the fiat system. Obviously the best way to express this view is to focus on the physical market instead of the paper one (which as some investors in SLV have learned the hard way). And speaking of silver, a quick glance at today's Comex holdings update indicates that while total silver continues to flirt with the 100 million ounce total on the downside (hitting a record low yesterday at 100.5 million ounces), following yet another reclassification from Registered to Eligible silver at the Comex vault for a total of 496k ounces (or 6.3% of the vault total), true physical in the Comex just dropped to a new all time low of just 32.2 million ounces.

First, some more from the WGC:

Marcus Grubb, Managing Director, Investment at the World Gold Council commented:

“The resilience of gold during recent volatility in the commodities market exemplifies the strength of the global gold market and its unique demand drivers. High levels of investment demand across the world, strong demand in India and China, the continued strength of the technology sector together with central bank purchasing demonstrates gold’s diverse demand drivers. We anticipate continued strong demand during the rest of 2011.”

Albert Cheng, Managing Director, Far East at the World Gold Council commented:

“Chinese appetite for gold has increased rapidly over the past few years. In March 2010, we predicted that gold demand in China would double by 20201, however, we believe that this doubling may in fact be achieved sooner. Increasing prosperity in the world’s most populous country coupled with their high affinity for gold will serve to drive demand in the long-term. Near term inflationary expectations are likely to support the investment case for gold.”

  • Global gold demand in the first quarter of 2011 totalled 981.3 tonnes, up 11% year-on-year from 881.0 tonnes in the first quarter of 2010. In value terms, this translated to US$43.7bn, compared with US$31.4bn in the first quarter of 2010, an increase of almost 40%. This was largely attributable to a widespread rise in demand for bars and coins, supported by an improvement in jewellery demand in key markets.
  • The quarterly average gold price hit a new record of US$1,386.27/oz (London PM Fix), its eighth consecutive year-on-year increase. Despite a period of price consolidation in the early part of the quarter, it climbed to record highs throughout March and has continued to achieve new highs in April and May.
  • During the first quarter of the year, investment demand grew by 26% to 310.5 tonnes from 245.6 tonnes in the first quarter of 2010. In value terms, investment demand was US$13.8bn. The main growth came from bar and coin demand which increased by 52% year-on-year, to 366.4 tonnes. In value terms, this represented a near-doubling of demand to US$16.3bn from US$8.6bn in Q1 2010.
  • Central bank purchases jumped to 129 tonnes in the quarter, exceeding the combined total of net purchases during the first three quarters of 2010.
  • ETFs and similar products witnessed net outflows of 56 tonnes ($2.5bn). Redemptions were concentrated in January. Despite the outflows, the collective volume of gold held by global ETFs by the end of the quarter was in excess of 2,100 tonnes equating to more than $95bn.
  • Jewellery demand in the first quarter of 2011 registered a gain of 7% from year earlier levels of 521.3 tonnes to reach 556.9 tonnes. This equated to a record quarterly value of US$24.8bn. India and China, the two largest markets for gold jewellery, together accounted for 349.1 tonnes or 63% of the total, a value of US$16bn. China’s jewellery demand reached a new quarterly record of 142.9 tonnes ($6.4bn) up 21% from 118.2 tonnes in the first quarter of 2010.
  • Technology demand remained steady in the first quarter at 113.8 tonnes ($5.1bn). A revision to the fourth quarter figures now means that 2010 was the highest year on record for gold demand in electronics at 326.8 tonnes or $12.9bn.
  • In Q1 2011, gold supply declined by 4% year-on-year to 872.2 tonnes from 912.1 tonnes in the first quarter of 2010. This decline was due to a sharp increase in net purchasing by the official sector and a fall in the supply of recycled gold, which was down 6% on year-earlier levels to 347.5 tonnes from 369.3 tonnes in the first quarter of 2010. Mine production increased by 44 tonnes year-on-year, a growth rate of 7% from year earlier levels, with negligible net producer de-hedging.
  • Central bank purchases jumped to 129 tonnes in the quarter, exceeding the combined total of net purchases during the first three quarters of 2010.

And next, a quick glance at the Comex happenings, where the recent silver rout has done nothing at all to moderate the ongoing collapse in reigstered silver (and luckily we are not holding our breath until that predicted by some reverse reclass from Eligible to Registered silver occurs).