Expat Indians rush to buy bullion as gold price plunges to $1,375

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Spot gold price plunged to $1,374.27 per troy ounce at 12.20am UAE time (8.20am GMT) today (Thursday) as weak inflation data took its toll on precious metals.

Silver prices, meanwhile, slipped to their lowest levels in more than two-and-a-half years, sinking to $22.20 a troy ounce at the same time today.

In Dubai, a gram of 18K gold can be bought for Dh123.40 this morning, while 24K gold is retailing for Dh164.53 per gram. The price of a gram of 24K gold was well above Dh200 a few months ago.

According to the latest World Gold Council (WGC) data published this morning, jewellery demand in both India and the Middle East was up 15 per cent, and in the US, demand showed a significant increase of 6 per cent for the first time since 2005.

Backed by expat Indians rushing to buy 22-carat gold from city of gold Dubai’s numerous jewellery stores in addition to the iconic Gold Souq, the UAE saw gold demand rise by 12 per cent in the latest quarter compared with the same period of 2012.

“Jewellery demand across the Middle Eastern markets experienced a revival in the first quarter,” the WGC report states. “Growth in the UAE largely represented purchases of 22-carat gold among expat Indian consumers,” the report highlighted.

The UAE saw gold sales of $1.14 billion in Q1 2013, up 8 per cent in value terms from the same quarter last year. Overall in 2012, the UAE saw gold sales of $3.36 billion, accounting for about one-third of the $10.1 billion in gold sales in the entire Middle East region in 2012, according to WGC data.

“Improvements in other markets across the region were predominantly indicative of a positive response to the declining gold prices,” maintains WGC.

“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 per cent of the market,” said Marcus Grubb, Managing Director, Investment at the World Gold Council.

Demand for gold in China and India was also driven by an increase in bar and coin sales, said WGC, which reckons that gold bar and coins sales in India surged by a massive 52 per cent during the first three months of 2013 (compared with Q1 2012) while the same in China was up 22 per cent year-on-year.

In the US, demand for bars and coins was up 43 per cent compared with the same quarter in 2012.

Overall, the global demand for gold jewellery was up 12 per cent in the first quarter of 2013, driven by “significant increases” in gold sales in India and China, the world’s two largest consumers of gold.

Globally, gold bar investment was up 8 per cent while official coins (such as American Eagles and Canadian Maple Leafs) were up 18 per cent.

However, in a sign that institutional investors continue to exit bullion, WGC data shows that gold held by gold-backed Exchange Traded Funds (ETFs), which in 2012 accounted for 6 per cent of the world’s gold demand, fell by 177 tonnes.

The latest WGC Gold Demand Trends report, which reports on the period January-March 2013, shows a market driven by diverse global demand, and an appetite for owning gold jewellery that continues to grow, WGC said in a media statement.

Jewellery demand in China was up the most among major global markets, rising by 19 per cent on the same period last year, and stood at a record 185 tonnes.

WGC says central banks remained significant acquirers of gold, making purchases of 109 tonnes for the seventh consecutive quarter.

Nevertheless, overall total global demand for gold in Q1 2013 fell 963 tonnes, down 19 per cent compared with Q4 2012.

“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,” Grubb added.

In value terms, gold demand in Q1 2013 was $51 billion, down 23 per cent compared with Q4 2012. The average gold price of $1,632/oz was down 5 per cent on the average Q4 2012 price, and down 3 per cent on the same period the previous year.

However, with the latest plunges in gold prices since the beginning of the second quarter of this year, gold demand has seen a massive surge with physical buying support coming from India and China even as institutional investors continue to dump paper gold.

The key findings from the WGC report for Q1 2013 are:

· Total demand in China totalled 294 tonnes in the first quarter, a rise of 20 per cent 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 185 tonnes, up 19 per cent on last year, while bar and coin investment was 110 tonnes, rising by 22 per cent from last year.

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

· Q1 2013 was the seventh consecutive quarter in which central banks acquired more than 100 tonnes 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 109 tonnes in Q1 2013, although the figure was 5 per cent lower than the purchases a year ago.

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

“Gold-backed ETFs, which made up 6 per cent 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 378 tonnes of investment in bars and coins, an increase of 10 per cent on the same period last year, and up 12 per cent on Q4 2012,” Grubbs added.

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

Gold demand and supply statistics for Q1 2013

· First quarter gold demand of 963 tonnes was down 13 per cent compared with Q1 2012

· The value measure of gold demand in Q1 2013 was $51 billion, down 16 per cent on the year before

· The Q1 2013 average gold price was $1,632 down 3 per cent on the year before

· The net outflow from ETFs was 177 tonnes in the quarter. That fall pushed the sum of ETF and total bar and coin demand to just below 201 tonnes. Total investment demand was 320 tonnes in Q1 2013, flat compared with a year ago

· Demand in the jewellery sector was up 12 per cent to 551 tonnes. Jewellery demand in China was 185 tonnes while demand in India was 160 tonnes

· Demand in the technology sector once again surpassed 100 tonnes for the quarter. Demand in Q1 2013 was 102 tonnes, down 4 per cent on the previous year

· The Q1 2013 total mine production was up 4 per cent on last year at 688 tonnes. Recycling fell 4 per cent resulting in a total supply that is 1 per cent higher than a year ago

· Net central bank purchases totalled 109 tonnes, 5 per cent lower than a year ago, making this the ninth consecutive quarter in which central banks have been net purchasers of gold

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