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Global Gold Demand in 2011 Rises 0.4% To $200 Billion - Central Banks, Asia and Europe Diversifying Into Gold

Submitted by Tyler Durden on 02/16/2012 09:25 -0400

Global Gold Demand in 2011 Rises 0.4% To $200 Billion - Central Banks, Asia and Europe Diversifying Into Gold

Gold’s London AM fix this morning was USD 1,716.00, EUR 1,320.51, and GBP 1,094.74 per ounce.

Yesterday's AM fix was USD 1,725.50, EUR 1,309.88, and GBP 1,099.33 per ounce.

The World Gold Council released its comprehensive report today, “Gold Demand Trends Q4 and Full Year 2011” looking at demand in gold demand in full year 2011 and the 4th quarter of 2011.

Global Gold Investment Demand - Bar and Coin Demand Larger Than ETF Demand Which Remains Small

The report is 32 pages long and well worth a read if you wish to be informed about the fundamentals of the gold market.

Executive Points
Here are the key points which we have garnered from reading the report:

Global demand for gold in 2011 rose a very sustainable and gradual 0.4% to 4,067.1 tonnes.

Global gold demand was worth a mere US$205.5 billion which is not a substantial sum considering the size of global capital markets today. It was the first time that global demand has exceeded US$200 billion and the highest tonnage level since 1997.

Central banks were net buyers of gold and their demand surged nearly 6 fold (570%) to 439.7 tonnes in 2011 - compared with 77 tonnes in 2010.

Demand from the investment sector was the driving force behind demand for gold reaching a 14-year high in 2011.

The investment sector saw annual demand of 1,640.7 tonnnes up 5% on the previous record set in 2010 and with a value of US$82.9 billion.

Demand for gold bars and coins accelerated, reflecting a blend of positive influences including concern over the financial health and future viability of the euro area; high inflation in some countries; positive price expectations; and the relatively poor performance of a range of alternative investments.

Investment demand globally surpassed the record high of 2010, with China, India and interestingly Europe (primarily Germany and Switzerland) all reporting record levels of demand in 2011.

Investment was the main driver of growth, although jewellery and technology were resilient despite higher and record nominal prices.

Mine production, while rising to a record, increased minimally and was offset by lower recycling activity and significant central bank purchases.

Specifically, European investment demand experienced its seventh consecutive annual gain and accounted for one quarter of all global gold retail investment in 2011.

Demand for gold bars and coins globally contributed to strong investment demand, substantially increasing year-on-year in both volume and value terms.

Investment demand for gold is likely to remain high throughout 2012 as global economic uncertainty, low interest rates and high inflation in many economies reinforce the attraction of gold’s diversification properties.

Central bank were net buyers and had demand which hit their highest amount in forty years.

Buying in China should overtake India this year as the world’s top consumer of the yellow metal.

In Q4 2011, China consumed 190.9 tonnes of gold, compared with India's 173.0 tonnes, ranking China top in terms of consumption, something the WGC had not expected last year.

The data and info graphic show the continuing and often underestimated role of gold coin and bar demand over ETF demand which remains quite small vis-à-vis coin and bar demand and small vis-à-vis other markets

Investment Demand
Global demand for gold reached 4,067.1 tonnes last year, the highest tonnage since 1997, due in large part to a nearly 5% increase in investment demand, which hit a record 1,640.7 tonnes.

Asian countries like China, India, Vietnam, Thailand and others see bullion as a store of value against the growing inflation and the ongoing debasement of their currencies.

The fundamentals for gold in 2012 look good. Continuing low and often negative real interest rates will continue to support gold’s safe haven status. The Fed’s statement that it will continue to see rates remain very low until 2014 is very bullish for gold.

Central banks were net buyers of gold and their demand surged nearly 6 fold (570%) to 439.7 tonnes in 2011 (compared with 77 tonnes in 2010), more metal than at any time since the end of the gold standard in 1971.

The World Gold Council noted that, “The buyers are all ... in Latin America, Asia and the Far East and they are basically enjoying strong growth, fiscal surpluses and growing foreign exchange reserves."

European Demand on Eurozone Debt Crisis
Financial instability and elevated sovereign, monetary and systemic risk continues leading European investors to increasing their purchases of bullion in the form of coins and bars.

The WGC reported that European demand rose by more than 25% year on year to 374.8 tonnes in 2011, with Switzerland and Germany being the main drivers in the region.

Gold demand in the UK and Ireland remains lack lustre – although the data remains poor in this regard.

The ‘Other Europe’ category of demand, at 23.4 tonnes for Q4 and 90.8 tonnes for 2011, now accounts for a considerable proportion of investment in Europe. A substantial amount of this new demand has been generated by countries with previously no or very little interest in gold investment, including the UK and Ireland and a number of Eastern European countries. In value terms, annual demand from the markets grouped within this category amounted to a very small €3.3bn.

Demand for gold in ETF products reached a net 154 tonnes in 2011, compared with 367.7 tonnes in 2010, although more than 1/2 of that total’s investment was solely Q4 of last year alone, when ETP demand accounted for 86.8 tonnes.

Jewellery Demand
Global jewellery demand totalled 476.5 tonnes in the fourth quarter of 2011, a 15% year-on-year decline. In value terms, demand was 5% higher at US$25.9bn, a new quarterly record. On a full-year basis, tonnage demand of 1,962.9 was 3% below 2010, showing resilience given a 28% increase in the average annual price. The value of annual demand grew by 25% to a new record of US$99.2bn

Technology Demand
Gold demand in the technology sector declined 3% year-on year in the fourth quarter of 2011 to 112.3 tonnes, the lowest quarterly figure since the third quarter of 2009. In value terms, this translated to a 19% year-on-year increase to US$6.1bn. Annual demand was measured at a broadly steady 463.5 tonnes, comfortably above the 456.3-tonne average of the preceding five year period. The value of 2011 demand surged 28% and reached a record US$23.4b.

Gold Supply
On the supply side, gold mine output rose just 4% (yoy) but reached a new annual record of 2,809.5 tonnes last year.

The WGC reported that the producer hedge book increased marginally for the first time in a decade last year, with 18 tonnes of hedging added to the estimated outstanding global hedge book of 158.0 tonnes.

Recycling remained high and fell just 2% on the year to 1,611.9 tonnes showing that the ‘(wo)man on the street’ and much of the retail public in many western countries continues to sell gold.

Conclusion
The figures and data shows that the fundamentals of the gold market remain very sound with global demand having increased gradually and sustainably and supply remaining restrained.

Importantly, most of the buying was buy store of wealth and long term diversifiers (Asian and European coin and bar buyers and central banks). This is not ‘hot’ speculative money and therefore this gold is in strong hands and unlikely to be sold for some time.

The recent increase in demand have been very gradual in tonnage terms and is very sustainable given the extremely low level of gold bullion ownership internationally and particularly in the western world. Allocations to gold in global investment portfolios remain negligible.

This in conjunction with a global sovereign debt crisis centred on the appalling fiscal position of most industrialised nations, the risk of global recessions and or a Depression and very significant counter party and systemic risk means that gold’s bull market looks set to continue for the foreseeable future.

World Gold Council: “Gold Demand Trends Q4 and Full Year 2011” Full Report can be read here.

For breaking news and commentary on financial markets and gold, follow us on Twitter.

SILVER
Silver is trading at $33.07/oz, €25.48/oz and £21.12/oz.

PLATINUM GROUP METALS
Platinum is trading at $1,604.00/oz, palladium at $675/oz and rhodium at $1,500/oz.

NEWS
(Reuters)
Gold Demand Rises in 2011 as Central banks, China Buy - WGC

(Mining Weekly)
Gold Demand Tops $200 Billion in 2011 - WGC

(Financial Times)
China set to become biggest gold market

(Business Week)
China Seen Surpassing India as Biggest Gold Market This Year

(The Washington Post)
China poised to overtake India as world’s biggest gold market as demand surges, council says

(Reuters)
India's 2012 gold imports seen steady - WGC

COMMENTARY

(FirstPost)
How can China overtake India as largest gold consumer?!

(CBS News)
Precious metal: India's love affair with gold

(ZeroHedge)
Doug Casey: Is A US-Iran War Inevitable?

(GoldSeek)
Debt Saturation Ensures Much Higher Gold and Silver

- advertisements -

Thu, 02/16/2012 - 09:27 | 2165407 lolmao500

Where's the demand for silver??

Thu, 02/16/2012 - 09:28 | 2165417 economics1996

Silver up 25% since December.

Thu, 02/16/2012 - 11:54 | 2165883 GetZeeGold

Looks like Benny has decided to subsidize it today.

BTFD!

Thu, 02/16/2012 - 09:27 | 2165409 Ruffcut

it's taking a big shit right now.

Thu, 02/16/2012 - 10:00 | 2165515 Floordawg

Let's get to 1680 again and BTFD!

Thu, 02/16/2012 - 09:27 | 2165410 Zeff

Someone forward it to Buffett.

Thu, 02/16/2012 - 09:43 | 2165460 midtowng

Terrorists. You are all terrorists.

That's what Homeland Security says

Thu, 02/16/2012 - 10:10 | 2165551 CvlDobd

I would agree with Buffett and take the 16 XOM if they were valued and paid dividends in real money, gold.

Thu, 02/16/2012 - 09:29 | 2165423 Quintus

All very interesting, but as long as idiot 'Investors' believe that a piece of paper that claims to be gold IS actually the same as gold, none of this matters.

Infinite quantities of paper gold can be made to appear on demand - as if by magic!

Thu, 02/16/2012 - 09:29 | 2165424 RobotTrader

GC just tanked within minutes of this article getting posted

$1,707, wow!!!

Thu, 02/16/2012 - 09:34 | 2165435 Quintus

what a coincidence - the very second Crimex opened.

Never seen that before.

Thu, 02/16/2012 - 09:37 | 2165445 francis_sawyer

Somebody must have realized that gold isn't "backed" by anything...

Thu, 02/16/2012 - 12:00 | 2165892 GetZeeGold

Unlike the dollar that is backed by paper....and ummm.....ink.

Number of miners ever killed mining dollars = zero.

Thu, 02/16/2012 - 09:57 | 2165507 Eclipse89

Don't worry, Bernanke will make a viagra effect on gold in minutes.

Thu, 02/16/2012 - 10:03 | 2165519 Thomas Anderson

As the crisis in Greece continues and the Dollar gains on the Euro, Gold takes a little dip. It'll snap back and make a push past $2000 when the FED starts printing.

Thu, 02/16/2012 - 11:33 | 2165792 Richard Head

Kill yourself, please.

Thu, 02/16/2012 - 12:54 | 2166140 Thomas Anderson

...

Thu, 02/16/2012 - 19:39 | 2167684 StychoKiller

Unfortunately for you, it promptly ramped up all day to close around $1728+

Thu, 02/16/2012 - 09:31 | 2165427 RobotTrader

Surprise beat in PPI.

There is no inflation.

Nada.

Zero.

Zip.

Thu, 02/16/2012 - 09:37 | 2165444 Everybodys All ...

No surprise ... manipulation of the inflation number is now common. The Fed is all in on this and we do have to re-elect Obammer if we intend to go total fascist.

Thu, 02/16/2012 - 09:54 | 2165493 tarsubil

There is no inflation within 100 miles of Baghdad. We have destroyed 2 tanks, fighter planes, 2 helicopters and their shovels - we have driven them back.

Thu, 02/16/2012 - 11:17 | 2165742 Saro

If gains in efficiency would have made a price decrease, then the price staying the same is actually an indication of inflation.

An accurate measure of inflation would have to include what the price should have been, rather than simply what is was ,and since there is absolutely no way to measure what the prices should have been, all reported inflation numbers are bogus.

Thu, 02/16/2012 - 11:43 | 2165833 GMadScientist

Go fill up your dipshitmobile and say that again.

Thu, 02/16/2012 - 09:32 | 2165430 gojam

Tyler, you should take a look at this.

http://hat4uk.wordpress.com/

John Ward is fairly reliable as a source and he's saying that a timetable for Greek default has been circulated. D-Day is March 23rd.

Thu, 02/16/2012 - 09:36 | 2165440 wavegenius

top 5 best and 5 worst elliotticians

http://www.wavegenius.com/2012/02/09/my-list-of-the-top-5-elliotticians-...

Thu, 02/16/2012 - 09:37 | 2165441 wavegenius

yeah

Thu, 02/16/2012 - 09:36 | 2165442 Badabing

gold bitchez

Thu, 02/16/2012 - 09:39 | 2165447 falak pema

Gold is a small market AND for those with too much fiat relative to their day to day as their perennial investment needs; thus with enuff surplus to envisage the hedge of depressionary trends; it doesn't make sense unless you have much more cash reserves than a basic RE/life insurance/ Stocks and bonds portfolio warrants.

Most people are not there. By the time you buy a house, a life insurance and have a portfolio of strong stocks and bonds, you are already in the top 10% category of society. Today the young generation has no money for higher education, can't pay their rentals, and do temporary work unless they have first class degrees. Depressionary times and the pyramid collapses.

Gold? Silver? for the young....??? Put the picture back in its frame. THEY won't be investing in gold/silver for a looooong time.

Thu, 02/16/2012 - 10:00 | 2165513 tarsubil

Do you honestly believe this? If you do and are not a member of the club, you are in for a big hurt.

Thu, 02/16/2012 - 10:46 | 2165662 falak pema

I'm young at heart...but..

Thu, 02/16/2012 - 11:32 | 2165787 slewie the pi-rat

why argue about another of goldCore's non-critical re-publication of worldGoldCouncil "official" dadadadada which shows "supply and demand" is: "bullish"?

falak_p may have enuf fermented grape juice in his cellar to enjoy a freaking seige!

Thu, 02/16/2012 - 10:15 | 2165571 oddjob

Bank on the greedy boomers printing like mad to honor their lavish pensions, that's the only way they will get paid out.

Thu, 02/16/2012 - 10:26 | 2165603 cartonero

Psychopaths blame anyone and everyone else for the problems they create. Try thinking independently.

Thu, 02/16/2012 - 10:37 | 2165643 oddjob

Labeling somebody that refuses to pay for the habits of a morally culpable generation a psychopath can only come from a braindead penguin.

Thu, 02/16/2012 - 13:52 | 2166388 cartonero

So where does labeling an entire generation come from? Funny you project your own braindeadness on someone who asks you to think.

Thu, 02/16/2012 - 14:11 | 2166479 oddjob

Ask me to think?....30 years of overpaid acedemia think asking that same question is worth 150k a year.

Thu, 02/16/2012 - 13:26 | 2165472 RunningMan

Are coins and bullion counted as jewelry or investment in this split?

EDIT: I see the chart below. Wonder how much coins have risen, since many newcomers to the metal are investing that way (to own the physical), more so than jewelery I believe. But looks small.

Thu, 02/16/2012 - 10:00 | 2165510 Ex-Pat

When the next market vagary arrives, the dollar will rise and fiat metals will fall, at which time GoldCore will need some more sell-side support, again.

Thu, 02/16/2012 - 11:08 | 2165712 Gunther