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Gold loses lustre, nosedives by 15%

February 18, 2014

Bloomberg News

London: Gold demand fell 15 per cent last year as sales from bullion-backed funds and less central bank buying outpaced record consumer purchases that saw China overtake India as the largest user, the World Gold Council said.

Global demand declined to 3,756.1 metric tonnes in 2013, from 4,415.8 tonnes a year earlier, the London-based council said yesterday in a report.

As investors sold as much through gold-backed exchange-traded products as they bought in the previous three years combined, the steepest price drop since 1981 spurred a 28 per cent jump in bar and coin buying and 17 per cent increase in jewellery consumption. Chinese usage rose 32 per cent to a record.

Bullion slumped 28 per cent last year as some investors lost faith in the commodity as a store of value and as the United States Federal Reserve said it would slow stimulus. Lower prices boosted demand from Asia, resulting in a flow of metal from west to east. Prices rebounded 10 per cent this year.

"The consumer stepped in and took up that slack from the exchange-traded funds (ETFs)," Marcus Grubb, managing director of investment strategy at the council, said by phone from London. "The consumer is still very much going to be on the bid in the gold market in 2014, perceiving that gold is good value at these prices."

Price fluctuation

Fourth-quarter demand fell 29 per cent from a year earlier to 857.8 tonnes, the lowest level since 2009, the industry group said. Gold for immediate delivery climbed to $1,326.35 an ounce in London this year, rebounding from the first annual drop since 2000. Prices averaged $1,272 in the fourth quarter, down 26 per cent from a year earlier and 4.4 per cent lower than the third quarter.

Global jewellery demand rose 5.8 per cent to 553.8 tonnes in the latest quarter, with the full-year total climbing to 2,209.5 tonnes. Bar and coin buying fell 5.5 per cent in the three months through December, narrowing last year's total to a record 1,654.1 tonnes.

Total consumer purchases advanced 21 per cent to 3,863.5 tonnes last year, with demand increasing 32 per cent to an all-time high of 1,065.8 tonnes in China and 13 per cent to 974.8 tonnes in India, the report showed.

Indian consumption was limited after the government imposed import restrictions to curb a current account deficit. Bar and coin buying also accelerated in Turkey and the United States last year, the council said.

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Source: Times of Oman

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