China pipped India as the top gold consumer of the world in 2023 with Beijing’s demand for jewellery rising by 10 per cent and investment by 28 per cent. Releasing Gold Demand Trends for 2023 and Q4 2023, the World Gold Council (WGC), a body of gold producers, said China was the main engine of growth.

In contrast, demand for gold fell in India for jewellery but increased for investments. The WGC said demand for jewellery dropped six per cent from 2022 to 562.3 tonnes, while for investment it increased to 185.2 tonnes, up 7 per cent over 173.6 tonnes a year ago. Overall, gold demand in 2023 was 747.5 tonnes, down 3 per cent from 774.1 tonnes.

Somasundaram PR, Regional CEO (India), World Gold Council, said bar and coin investment in India surged 64 per cent year-on-year and surpassed the five-year average to 67 tonnes in the December quarter.

Central bank buys

On the other hand, China’s gold demand was up 16 per cent to 959 tonnes (824 tonnes in 2022) toppling India as the largest gold consumer with their jewellery demand increasing 10 per cent to 630 tonne (571 tonnes). Unlike India, China is also one of the largest gold producers.

Global demand for gold in 2023 dropped 5 per cent to 4,448 tonnes, excluding over the counter trade (OTC), compared with 2022. Including OTC and stock flows of 398 tonnes, total gold demand in 2023 was a record 4,899 tonnes, the WGC said.

Central banks’ buying continued at a break-neck pace. Net purchases of 1,037 tonnes in 2023 almost matched the 2022 record. It was short by 45 tonnes. Global gold ETFs saw a third consecutive annual outflow, losing 244 tonnes. The pace of outflows slowed markedly into year-end, but October’s hefty outflows dominated the Q4 picture.

Jewellery offtake steady

Global annual bar and coin investment saw a mild contraction (-3 per cent year-on-year) as divergent trends in key Western and Eastern markets offset one another. Annual jewellery consumption held steady at 2,093 tonnes, even in the high gold price environment. China’s recovery supported the robust global total, the WGC said.

Despite a Q4 recovery in electronics, the annual volume of gold used in technology fell below 300 tonnes for the first time in the Council’s data However, recycling didn’t respond to higher prices as much as the WGC expected. While recycling in China responded to both higher prices and a weakening economic environment, a depletion of near-market stocks in India countered the price impact, particularly at the end of the year. In West Asia, holders of gold have been reluctant to sell given the uncertain geopolitical environment.

In view of the 2023 experience, the WGC said it expects prices to have only a moderate impact on recycling in 2024, so long as they don’t rise too far. An economic pickup in China could also mitigate higher recycling volumes. “All in all a small rise is likely over 2023’s total,” it said.

The WGC said despite weak demand, India’s gold imports increased 20 per cent to 781 tonnes (651 tonnes) raising government’s concern on current account deficit. Gold recycling was also up 20 per cent at 117 tonnes (98 tonnes).

Q4 demand 4% down

Gold demand in the December quarter was down four per cent at 266 tonnes against 276 tonnes logged in the same period last year, largely due to sharp spike in prices. In terms of value, it was up 15 per cent to ₹2.50-lakh crore (₹2.17-lakh crore) as the yellow metal rallied on back of global uncertainties.

In contrast, gold demand in China was up 24 per cent at 246 tonnes (199 tonnes) in December quarter as consumers found a recourse in yellow metal amid economic turbulence and bearish stock markets.

In India, jewellery demand was down 9 per cent at 200 tonnes (220 tonnes) valued at ₹1.87 lakh crore (₹1.73 lakh crore), up 8 per cent.

Given the rise in prices, investments in gold was up 18 per cent at 67 tonnes (56 tonnes) which was valued at ₹62,610 crore (₹44,340 crore).

Gold imports jumped 43 per cent to 218 tonnes (152 tonnes) despite a slow down in demand. Recycling of gold was down 16 per cent at 26 tonnes (30 tonnes) as consistent high prices gave consumers the confidence to hold back their decision to recycle jewellery.

Gold prices increased 16 per cent in December quarter to ₹52,761 (₹45,564) per 10 grams.

Somasundaram PR said though prices declined in the first two months of December quarter, it started firming up and suppressed demand during the year-end.

In one of the rare trends, gold prices remained firm last year despite high interest rate in the US and bullish stock market. Given the geo-political developments and global economic uncertainty gold prices may remain volatile on the higher side amid strong demand in India, he said.