Global gold demand fell 7 per cent to 973 tonnes during the January-March period this year compared to the same period last year mainly due to a decline in investment demand.

The overall gold demand stood at 1,047 tonnes in Q1 2017, the World Gold Council said in its ‘Gold Demand Trends’ report for Q1 2018.

The fall in demand was largely caused by a decline in investment demand for gold bars and gold-backed exchange traded funds (ETFs) following a subdued gold price environment.

Total investment demand in the first quarter was down 27 per cent at 287 tonnes compared with 394 tonnes in the corresponding quarter of 2017.

Weakness in bar and coin investment, driven by China, Germany and US, led to a 15 per cent drop in global demand to 254.9 tonnes.

Range-bound gold prices undermined investor interest in these markets, although China’s weakness was partly due to the exceptional strength in Q1 2017, WGC said.

ETFs inflows declined by 66 per cent to 32 tonnes during the quarter under review compared with 96 tonnes in the same quarter last year, mainly driven by the US, where the return of volatility in the stock market made investors seek refuge in gold, it said.

“Last year, Europe led the inflows into ETFs following geopolitical situations, including elections in at least three countries and Brexit and general weakness in economic conditions. Those situations are stable this year,” WGC, India, Managing Director P R Somasundaram told PTI here.

Jewellery demand

Meanwhile, the report revealed that global jewellery demand was flat at 487.7 tonnes in Q1 2017, compared with 491.6 tonnes in the same period last year.

Jewellery demand in China was up by 7 per cent, buoyed by holiday demand, and in the US, the situation improved due to supportive economic conditions.

However, in India the demand was down 12 per cent at 87.7 tonnes compared with 99.2 tonnes in the first quarter of 2017, as consumers were discouraged by rising gold prices, weakening rupee and the GST transition issues faced by unorganised retailers.

The report said that central banks had added 116.5 tonnes to global official reserves in Q1 2018, compared with 82.2 tonnes, up 42 per cent.

Russia, Turkey and Kazakhstan again dominated the list of central banks buying gold, adding 91 tonnes to official reserves. Qatar, it said, was the biggest seller, cutting reserves by 3.1 tonnes.

Demand for gold in the technology sector witnessed 4 per cent growth in the first quarter at 82.1 tonnes, compared with 78.9 tonnes in the same period last year.

Wireless sector was a key area of growth as 3D sensors for facial recognition were increasingly deployed in smart phones, gaming consoles and security systems.

“Although the demand was down, we saw encouraging levels of jewellery demand in China, the US and Europe, continued growth in the technology sector and steady inflows into ETFs, albeit at a slower pace than last year,” WGC head of market intelligence, Alistair Hewitt, said.

Solid inflows into central bank reserves also highlight the ongoing relevance of gold as a strategic asset for institutional investors, he added.

Meanwhile, the report also said the total supply of gold increased by 3 per cent in the first quarter of this year to 1,064 tonnes, due to increased mine production and net hedging.

Mine production and recycling levels both saw fractional increases compared with Q1 2017, at 770 tonnes and 288 tonnes, respectively, it added.