While there was strong appetite for gold from the investment community, overall demand for gold fell modestly in 2019, as rising prices in non-US currencies, including the Euro, Pound sterling, Japanese yen, Indian rupee and Chinese yuan, reduced consumer demand for jewelry, bars and coins. In particular, global jewelry demand was down 6% compared to 2018, with China and India — responsible for over half the world’s jewelry demand — down 7% and 9%, respectively. However, despite the decrease in the volume of jewelry demand, the overall amount spent on jewelry in US dollar terms actually increased due to the year-on-year rise in the gold price.
Gold demand for electronics and other industrial uses fell by a modest 2% in 2019 as trade tensions weighed on global demand and production. An increase in demand for 5G infrastructure could help to reverse this trend going forward. Central bank purchases of gold were once again substantial in 2019, totaling approximately 650 tonnes. This was a slight decrease of 1% year-on-year but 2019 still represented the second-largest year of net central bank purchases in the last 50 years, with Turkey, Russia, China, and Poland leading the way. Central banks have now been net purchasers of gold for 10 straight years as they look to it as a source of reserve diversification.
Overall supply of gold in 2019 increased by 2%, mainly attributable to a rise in recycled gold. Global mine production was down by 1%, representing the first annual decline in mine supply since 2008 and potentially signaling that the mining industry has reached peak gold production for the foreseeable future. As gold prices have increased and capital has become more readily available in recent years, there is evidence of increased spending on exploration by mining companies, but the costs of mine construction and the time required for environmental studies and permitting activities before reaching the production stage means that a return to sustained global production growth could be delayed.
The supply of recycled gold, which historically has correlated positively with the gold price, increased by 11% in 2019 as rising prices inspired sellers to bring their holdings to the market.