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LONDON: Demand for gold fell last year for the first time since 2009 as Asians bought less jewellery and Western investment dipped, the World Gold Council said in a report bears saw as new evidence the 12-year rally may be topping out.
The WGC, which is funded by the gold industry, said yesterday that gold consumption was expected to be steady this year but added that it may be some time before it revisits the high levels seen in the worst of the financial crisis.
“It’s hard to see a major move up in demand (this year). I know there are bears out there who are starting to call the end of the bull market in gold, but we don’t agree,” said the WGC’s managing director for investment, Marcus Grubb. “Demand will remain high, but we’re talking small single-digit (percent) numbers in terms of growth from the current tonnage level,” he said.
In 2012 demand was down 4 percent from the previous year’s total, the WGC report said. “The tonnage last year was 4,405 tonnes for consumer demand, and if you add in over-the-counter demand, it’s another 100 tonnes higher,” Grubb added. “We would expect 2013 to be quite similar.”
Grubb said he saw gold prices, which have traded between $1,625 and $1,695 an ounce this year, staying in their current trading range, although events that could destabilise the market, such as US budget talks, could push them higher.
The gold price is down 1.4 percent so far this year after posting its biggest quarterly drop since 2008 in the last three months of 2012. Credit Suisse, Goldman Sachs and GFMS have all forecast a turn in gold’s bull cycle this year.
“Unless something major changes in the macro landscape, this (report) does back up the idea that investors’ attention is much more focused elsewhere at the moment,” Credit Suisse analyst Tom Kendall said.
Jewellery demand fell 3 percent last year to 1,908.1 tonnes, with the biggest absolute drop noted in India, the largest gold consumer, where a weak rupee led to record-high local prices.
In the fourth quarter it rose 11 percent, however, helped by a 35 percent rebound in Indian jewellery demand. “Jewellery could have a good year in 2013,” Grubb said. “Western demand might at last improve as the U.S. economy and others improve.”
China, the second-biggest gold buyer behind India, saw a 1 percent drop in jewellery demand to 510.6 tonnes, its first annual decline since 2002. Overall demand was flat in China in the full year and fell 12 percent in India, although buying rose in the final quarter as buyers scrambled to avoid a widely anticipated rise in import duty that was announced in January.
“Provided we see no more increases in import duty, we still think we will see India continue to recover from what was a difficult year in 2012 overall,” Grubb said. He said a higher number of auspicious gold-buying occasions in the first quarter of 2013 would probably favour the metal.
In China, demand is expected to recover to between 780 and 880 tonnes this year, against 776.1 tonnes last year. “The jury’s out on a major re-acceleration of growth in Chinese gold demand,” Grubb said.
Buying by various central banks continued its upward trend to hit a 48-year high at 534.6 tonnes. Grubb said he expected the official sector to match last year’s buying in 2013, partly because monetary easing by developed countries was undermining confidence in the value of currencies.