Gold Demand In One Chart: Physical vs ETF

Tyler Durden's picture

China's demand for gold jumped 20% to 294 tonnes in the first quarter of 2013, while global gold demand overall slid 13% thanks to the dramatic rotation of demand from paper to physical. Chinese demand in gold bars and coins grew to 109.5 tonnes - more than double the five-year quarterly average of 43.8 tonnes. Central banks added 109.2 tonnes of gold to their reserves in Q1 2013, the ninth consecutive quarter of net purchases. But it was the Q1 ETF outflows of 176.9 tonnes, equating to a 7% decline in total gold ETF holdings that obscured the strong rise in investment for gold bars and coins at the retail level. In the face of the huge 'paper' gold ETF outflows, 'physical' gold demand surged to its highest in 18 months...


And direct from the WGC showing Q1 demand breakdown:

More from the WGC:

Overall total global demand for gold in Q1 2013 was 963t, down 19% from Q4 2012.


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


“The price drop in April, fuelled by non-physical moves in the market, proved to be the catalyst for a surge of buying that has left many retailers short of stock and refineries introducing waiting lists for deliveries. Putting this into context, sales of bars and coins, jewellery and consumption in the technology sector still make up 81% of the market.


“What these figures show is that even before the events of April, the fundamentals of the gold market remain robust with growing demand in India and China, central banks consistently adding gold to their reserves and strong buying of investment products such as gold bars and coins.”


The key findings from the report are as follows:


• Total demand in China totalled 294t in the first quarter, a rise of 20% on the same quarter last year, as the economy continued to pick up from the downturn experienced in the second half of 2012. Of that figure, jewellery demand in the quarter was a record 185t, up 19% on last year, while bar and coin investment was 110t, rising by 22% from last year.


• The Indian market also demonstrated a continued appetite for gold. Total demand was 257t, up 27% on the same quarter last year. Retail investment was up 52% while jewellery was up 15% on Q1 last year.


• Q1 2013 was the seventh consecutive quarter in which central banks acquired more than 100t of gold, and the ninth consecutive quarter in which central banks have been net purchasers as they diversify their portfolios. Central bank net purchases were 109t in Q1 2013, although the figure was 5% lower than the purchases a year ago.


• ETFs saw a net outflow of 177t in the quarter. By contrast there were strong inflows into other forms of investment: bar and coin demand was 378t, 10% higher than last year.


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


“Gold-backed ETFs, which made up 6% of gold demand in 2012, have seen some holders, primarily in the US, collect profits and move into equities. While gold ETF holdings are down, this has been balanced by 378t of investment in bars and coins, an increase of 10% on the same period last year, and up 12% on Q4 2012.


“Overall, the long-term appetite for investment remains strong, demonstrated by the continued demand for bars and coins.”

Source: World Gold Council

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fonzannoon's picture

I just read this on another site. Awesome explanation of supply. Tyler should consider posting this as anarticle imho.

MillionDollarBonus_'s picture

Interesting. I wonder what the sell side analysts make of all of this? I'm still learning about the gold market, but I know that in an efficient market there cannot be as much arbitrage between the various gold assets as this article suggests. It’s certainly an amusing thought though. As usual, the question of why gold and silver are falling is one that I will leave to the experts.

The Juggernaut's picture

@MillionDollarBonus_: I told you yesterday to look up Andrew Maguire.  And who junked me when I said that there is almost a perfect negatively correlated relationship of paper gold versus physical delivery?  Who dun did it?!


You sound sarc all the time so you're more entertaining than anything.

EscapeKey's picture

You're trying to have a reasoned debate with the biggest troll on this site?

Pinto Currency's picture


These are World Gold Council numbers and are incomplete.

LBMA is allocating 15 to 20 tonnes per day for delivery and Shanghai allocating 10 tonnes per day for delivery.  Those numbers not included in this WGC "analysis".  And then there is Mumbai, Dubai, Singapore, Hong Kong physical gold market off-take as well.


Alos, ETF draw-down is partially investors taking delivery of gold and geting off the financial market grid post Cyprus 'bail-in' surprise.

Charles Nelson Reilly's picture

ehhh, he's not really a troll.  More like someone who crowbars their way into a conversation and then after talking for 5 seconds you debate whether you should knock his teeth out or put ex-lax into his drink?

Pinto Currency's picture



Re. supply - these types of articles are a bit of a distraction because they look at mine supply which is 75 million oz. per year when there are 5,000 million oz of gold above ground.

The real issue is the supply from this vast pool is disappearing as gold is increasingly tightly held due to c.b. money printing and Cyprus event while those two factors have also ramped demand in the West.

fonzannoon's picture

Hey Pinto what's up man. I hear you. Sorry if this is a bit lengthy, but I thought he addressed that here:

"Some investors argue that mined gold supply is irrelevant to the gold price because above-ground gold stocks are much greater than annual mined supply. While it is true that above-ground stocks dwarf mined production, this argument stems from a lack of understanding about marginal supply in the gold industry.

Investors must understand that mined gold supply from gold miners can be regarded as gold in the "weakest of hands" - they are the most marginal sellers. Gold miners produce gold and sell that gold on the market at the spot price because they have to use the money to meet their production costs.

If gold miners reduce production, then day-to-day demand must be met from other sources that are much more sensitive to prices. The buyers who ordinarily find the 2700 tonnes a year of mine supply to meet their demand will have to make due with 2500, 2200, or 2000, and so forth. This differential will have to be made from existing holders of gold, who care much more about prices than miners, and as gold drops they will be less willing to sell at a loss or small profit. Thus this supply will not be available to the market at any spot price (unlike newly-mined gold) and these sellers would prefer to wait for higher prices - which ultimately will result in a further constriction of supply.

To put this into perspective, if mined gold supply drops 10% because miners are cutting back production and struggling to survive, that would be around 250 tonnes (8 million ounces) of gold supply that would be removed from the market. This is equivalent to 25% of the GLD gold trust or all of the gold held by COMEX - this is a significant amount of supply that would have to be found from existing holders of gold. If it is not then gold prices will jump significantly higher.

Thus mined supply makes a huge difference to the supply and demand equation because it supplies physical gold to buyers regardless of spot price. When mine supply is forced down because mines are unprofitable then this difference in the physical market has to be made up from current physical holders of gold - which will be very tough to do in a tight physical market."

Do you think he makes a good point?

Pinto Currency's picture



The gold mine supply is marginal supply and a marginal change in marginal supply has very little impact.

LBMA and Sanghai are allocating ~ 7,500 tonnes of physical per year and there is incredible pull from the other physical markets that is rapidly adding-up while the vast gold pool is drying-up very quickly.  That is to me the real story.

Difficulty in finding new deposits to increase supply is interesting but it is a fraction of the physical story.

fonzannoon's picture

Thanks Pinto. Always appreciate the insight.

Pinto Currency's picture


Also, the draw-down in ETFs appears to be due to investor moving to allocated physical gold (probably in private vaults post Cyprus):

Moving Metal

While some investors have sold gold to buy stocks, others may have just changed the method of their allocations, according to Marcus Grubb, managing director of investment research at the World Gold Council in London. The $20 billion drop in the value of gold exchange-traded products and funds this month may signal some investors are moving metal to new accounts after banks adjusted their fees.

“There is evidence of some switching from safer assets into risky assets,” Grubb said in a telephone interview yesterday. “Some investors are still negative, they still see a lot of risk out there. They may have switched from the ETFs to the allocated bullion accounts.

UBS AG, Switzerland’s biggest bank, said yesterday that investors are more interested in converting ETP holdings into allocated accounts. The bank in January said it revised fees for unallocated accounts and was offering an alternative physical account that had a “lower fee structure.” Credit Suisse Group AG, Switzerland’s second-biggest bank, also adjusted precious metals charges.

Manthong's picture

“was offering an alternative physical account that had a “lower fee structure.””

..and that differs from allocated ABN AMRO un deliverable gold in what way?

sounds like a credit scam to me..

Q.. If a man controlled the credit of a country, he would have a control of all its affairs?

A." He might have that, but he would not have the money. If he had the credit and I had the money, his customer would be badly off.””
..said J P Morgan to Congress.

So who exactly is “he” and who is “the customer”?

btw.. that was after he said  "Gold is money and nothing else"

Acet's picture

I think that the missing piece of the puzzle is that until recently the weakest hands were not miners. The weakest hands of all were those who leased gold from the trustees of central bank gold.

Now that central banks all over are demanding repatriation of their gold, this is starting to go into reverse.

That and the detail that Gold spot price is actually the price of paper in the Comex, the supply of which is near infinite.

Not My Real Name's picture

If only there was a reliable metric available to track the ratio of gold holders with strong hands vs with those weak hands.

That being said, I think the overall evidence out there supports an increasing ratio.

widget's picture

Publicly available market depth and order book in the futures would be nice too...

DoChenRollingBearing's picture

THAT is an interesting comment fonzannoon.  Thanks for posting that snip and the link.


The 24hgold/eBay gold price/premium widgent shows an even higher than premium of AGEs to spot of 17.6%.  I have followed that widget for a couple fo years now, 17.6% is pretty high., at the bottom of their home page.

BoNeSxxx's picture

Thanks DCRB, I was trying to remember the widget you mentioned months ago... You just saved me the time of digging. I think the premiums on phyzz are THE thing to watch - especially in light of the chart posted above by Tyler(s).

The premium % is the only real arbiter we have (today). That too may change soon. Stay frosty my friend.

HedgeHammer's picture

I equate MDB to be more like a Turkey Vulture out of season. Those who hunt know just what I'm talking about, those who do not well they like to perch in the trees but their fat ass breaks every branch on the way in looking for something that will hold its own weight meanwhile the noise they create sends all the animals of the surrounding forest in all directions.

BLOTTO's picture

Its like trying to swat away a fly that is trying to land on a big pile of dog shit on the sidewalk...

...the fly is just as determined as the swatter.


So, just like when you see shit on the sidewalk, you ignore it and dont pay any really attention to it.


Time to get baked.

Long-John-Silver's picture

That reminds me of the time we had a fridge-thief. Someone was taking food from the communal refrigerator. I cooked a cake and blended an entire bar of ex-lax in the frosting. The fridge-thief was soon discovered.

Miffed Microbiologist's picture

You are very kind and mericiful to those horrible SOBs. One even had the audacity to steal the cheese out of my sandwich! We microbiologists have come up with strategies that have been so much worse to our victims ( I'm a bit ashamed I was a part of it) they would have chosen the free colon cleansing any day. Aways be aware from whom you are stealing. Revenge is a dish best served microbiological.


Badabing's picture

"Alos, ETF draw-down is partially investors taking delivery of gold and geting off the financial market grid post Cyprus 'bail-in' surprise".

Investors = big bank crooks harvesting ETFs

Pinto Currency's picture



In part but a large number appear to be bailing on the ETF's and just getting the metal.

This and people pulling their gold from bullion banks is causing stress in the gold market due to the fractional reserve (multiple sales of given bars) gold market that exists.

It's coming to head now all the while the financial media talks-down gold and silver.

Kirk2NCC1701's picture

It'd be nice to see more serious posts & analysis in the blogs, not just a ZH version of 'The View' -- with a bunch of gold bulls from the hills agreeing with each other and yanking each other's dicks.  So to speak. /s

The (serious) questions I have not seen raised or answered, include:

1. Quis Bono (Who Benefits) from the extreme price beat-down of PM.  Price-suppression ("keep it range-bound between, say, $1500 and $1700") I get.  But beating it down to the point of creating a "bullion run"?  Hello, hello!?  There is nothing to be gained by the CBs in Club-Fed.  Only the BRICs gain, and perhaps it is their CB's that are beating it down via our commercial banks.  Unless...

2. It is part of Iran's gold for oil revenues game -- played by both sides.  You know this does enter the trade dynamics and the Iranian economy.  Club Fed just does NOT want Muslim countries to use gold-backed currency.  Look what they did to Iraq and Libya -- and their gold and oil.

James_Cole's picture

It's easy to understand the price direction as long as you ignore the bullshit. The important number here is this one:

while global gold demand overall slid 13% thanks to the dramatic rotation of demand from paper to physical


People (on here anyway) CONSTANTLY misunderstand the gold market. 


For some comparison:

akak's picture


People (on here anyway) CONSTANTLY misunderstand the gold market.

There are also certain people here who constantly attempt to misrepresent, mischaracterize and minimize key aspects of the gold market as well.

James_Cole's picture

There are also certain people here who constantly attempt to misrepresent, mischaracterize and minimize key aspects of the gold market as well.

According to you that's me & the WGC, the same WGC which the content of this article comes from. 

Don't click on the link to their report - will infuriate you that they break out jewellery as a separate category. 

akak's picture

Yes, James, both you and the so-called World Gold Council are bald-faced liars and full of shit when it comes to acknowledging the primarily monetary nature of gold, as well as the full degree of investment demand for it.

According to your beloved WGC, the primary world demand for gold is for 'jewelry' (i.e., baubles), followed by "speculation"/investment, coins/medals, and various industrial purposes.  They go to absurd lengths to separate out coins, bars and all jewelry from overall investment demand for gold (as if the physical form of the gold matters to its ultimate purpose), thereby falsely downplaying and misrepresenting it, and almost NEVER do they, nor will they, acknowledge the monetary nature of gold, whether past or most especially present.


EDIT: Read a scathing indictment of the so-called World Gold Council (Jame's friends) here:

Kirk2NCC1701's picture

Interesting links.... that bring attention to the 'other gold':  Platinum.  The even scarcer and under-discussed PM.

BoNeSxxx's picture

Firstly, why call the posts here anything other than serious? And compare ZH to The View? Are YOU serious? Because most of us on here (troll bashing and potty jokes aside) are deadly so.

Secondly, your questions/points are interesting and valid ones... Why poison the very well you seek to drink from?

Speaking purely for myself, ZH is about the only thing keeping my head from spinning off my shoulders most days. I come for the articles but I stay for the comments... Insightful, intelligent, witty, poignant, funny, sometimes moving.... And with just the right mix of fart jokes.

Edit: you mostly answered your own question... Look at Iraq and Libya. There simply are no lengths they won't go to when it comes to preserving the ponzi... Gold... Must... Not... Win.

papaclop's picture

A wise man once said that the WorldGold Council was formed by central bank influenced lackeys to keep a real World Gold industry group from forming. A lot of what they write is a little shakey. The central banks are all buying but trying to discourage the public from buying.

quasimodo's picture

Perhaps, just MAYBE, if we all started to up arrow 5 dollar boner, he/it would short circuit--thus going full on retard and quit posting? 

One can dream


Hippocratic Oaf's picture

"You're trying to have a reasoned debate with the biggest troll on this site?"


He's not a trol. When you see the green $ sign, you know he hits below the belt.

We need him and his buffoonery

MillionDollarBonus_'s picture

I didn't look up Andrew Maguire because I want an objective take on the gold market. I will listen to the opinions of a range of experts, and then make up my own mind based on what I hear.

Charles Nelson Reilly's picture

Maguire has been in the bullion business for 3 decades, and worked for your boys at Goldman Sachs.  I'd say he is in the know.

Deo vindice's picture

MDB - you need to understand there is a difference between an "objective take" and an "objectionable take".

You seem to be holding out for the latter.

Beam Me Up Scotty's picture

How's FaceBook working out for you?  Does FB pay a dividend?

greatbeard's picture

>> I want an objective take on the gold market.

But you're hanging out at ZH and sparing with gold bugs?  Tell me, what other venues do you search for an objective take?

HedgeHammer's picture

MDB, I have never spoken to you nor have I ever had the urge to reply to you mainly due to the condescending tone in your posts, among other things. Andrew Maguire would be considered to be within that "Range of Experts" you so loosely refer too.

EscapeKey's picture

I didn't look up Andrew Maguire because I want an objective take on the gold market. I will listen to the opinions of a range of experts whose opinion piss off the most people on this site, and then make up my own mind based on what I hear.

Fixed it for you.

SMG's picture

Here you go...point and click.

Andrew Maguire is an independent bullion trader and a whistleblower. He alleged to United States regulators that fraud had been committed, and that prices in the international gold and silver markets had been manipulated. Maguire and his wife were injured in a hit-and-run accident a day after he was identified as the source of the allegations.

A. Magnus's picture

What, an actual TRADER isn't an 'expert' enough for you? Does one need to have a pointy head, talk with an effeminate lisp and come from a particular 'Ivy League' pedigree for you to consider their opinion?

You sir, are a piece of shit elitist troll. And you're wasting everybody's time here, including your own. NOBODY here wants to hear a bunch of banker propagandist bullshit, otherwise we'd frequent online Wall Street fecal depositories like CNBC, CNN and Fox News. Your mindless parroting of extablishment tripe is like the asshole Uncle in everyone's family who just won't leave shit alone - even when it's obvious that nobody gives a fuck...

RebelDevil's picture

Maybe he IS a banker or trader for a major instituition? How do we know?

MarsInScorpio's picture



"Don't you know who I am??!!


"You must not know who I am . . .


"I'm the Juggernaut, BITCH!!"


The Proletariat's picture

It is all fundamental MDB.  You obviously know that when demand is high and the supply is low....prices must fall.....right?

ArkansasAngie's picture

They're just trying to make all those JPM shorts in the money.

You'd think that national security would stop the selling of gold at discount to China.  Obviously some people's national security issues are more important than others.

What a crock of odiferous material.