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World Gold consumption to rise in 2019 to 2020, before falling in 2021: report

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CANBERRA (Scrap Register): World gold consumption is likely to grow at an average annual rate of 3.7% in 2019 and 2020 - reaching a peak of 4,728 tonnes in 2020 - and then decrease by 4.9% in 2021, to 4,497 tonnes, Australia's Department of Industry, Innovation and Science said in its Resources and Energy Quarterly report.

The growth is expected to be largely driven by central banks’ gold buying, with a forecast increase of 4.3% a year in 2019 and 2020, to over 700 tonnes by 2020. The official sector is expected to remain a net buyer throughout the forecast period. The need to diversify central bank reserves is the key driver of many central banks’ growing appetite towards gold. After reaching a peak of 711 tonnes in 2020, the pace of central bank purchases is expected to decrease by 10% in 2021, to 640 tonnes, as geopolitical risks moderate, the report said.

Retail investment is expected to drive up global gold consumption, as the demand for gold bars and coins rises in 2019 and 2020. The report estimates retail investment to rise by 13 and 12 per cent in 2019 and 2020, to 1,244 and 1,392 tonnes, respectively.

This is being supported by trade tensions, the economic slowdown across advanced and developing economies, and political uncertainty in Europe, Venezuela and the Middle East. In China, ongoing trade tensions with the US are likely to boost gold demand, as retail investors seek to buy gold as a hedge against the depreciation of the Renminbi. However, gold retail investment is expected to slow down after 2020, as global economic slowdown and trade tensions are expected to ease, the report said.

Jewellery demand is forecast to rise by 5.7% in 2020 and 4.6% (to 2,357 tonnes) in 2021. Demand from China - the world’s largest jewellery consumer - is expected to remain strong, supported by the Chinese Government’s monetary and fiscal stimulus.

In India - the world’s second largest gold jewellery consumer - a strong demand growth forecast is propelled by robust economic growth, ongoing urbanisation, rising farm incomes, and improved consumer sentiment.

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