PETALING JAYA: Consumers had increased their purchases of gold as prices of the yellow commodity had fallen from its record highs in August 2020.
This trend, which is indicative of a strong demand, represents an improvement from an extremely weak first quarter of 2020.
"The value of gold jewellery purchased by consumers enjoyed a post-Covid rebound, rising to 477.4 tonnes, which is a 52% annual increase, " the World Gold Council (WGC) said in a press release.
"The increase in consumer demand was buoyed by the decline in the gold price. There was a 10% decrease in the gold price over the course of the first quarter which, paired with the global economic recovery, boosted the pro-cyclical elements of gold demand."
Louise Street, senior markets analyst at the WGC, said economies around the world have started to cautiously reopen. This led to an encouraging return in consumer confidence in the first quarter, as illustrated by the stellar rise in gold jewellery demand. Price drop: A salesman waits for customers at a jewellery shop in Dubai. There was a 10% decrease in the gold price over the course of the first quarter. — Bloomberg
"Conversely, having seen investors take shelter in gold from the initial impacts of Covid-19, the first quarter of 2021 saw a sell-off in the gold price as confidence in economic recovery grew and US interest rates rose sharply, " he said.
"Despite this, gold retains its relevance in well-balanced portfolios, especially with a risk of inflation looming. Looking ahead to the rest of the year, we see reasons to be optimistic about the gold market as its main drivers remain well supported, " he added.
The WGC also said in its latest Gold Demand Trends report that gold investment demand fell in the first quarter due to hefty outflows in gold-backed exchange-traded funds (ETFs), as growing expectations of higher interest rates had impacted sentiment.
While the first quarter's overall global gold demand at 815.7 tonnes was on par with the preceding quarter, there was a significant 23% drop year-on-year, it said.
It noted that gold-backed ETFs saw 177.9 tonnes of outflows.
However, the WGC said the effect of this drop in ETF demand had been mitigated by the strength of bar and coins demand.
"Such retail gold purchases reached 339.5 tonnes, which is a 36% year-on-year increase, influenced by price-driven bargain-hunting and widespread concerns over growing inflationary pressures, " WGC said.
It said there were healthy levels of net buying by central banks in the first quarter as global official gold reserves grew by 95.5 tonnes, which was up 20% from the previous consecutive quarter.
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