Now that gold has pulled back from a peak of around $1,900 per ounce to less than $1,300 per ounce, many of the gold bugs have disappeared. What is interesting is that the actual demand in tonnage is not really dropping. The most recent data from the World Gold Council shows that global demand for gold in the first quarter of 2014 was 1,074 tonnes, versus 1,077 tonnes in the first quarter of 2014.

The quarterly prices used for the World Gold Council’s comparisons was $1,293.10 in London trading (in U.S. dollars) for the first quarter of 2014. That is only marginally higher than the fourth quarter of 2013, but way down from the $1,631.80 from the first quarter of 2013.

Where this gets interesting is that jewelry demand was the biggest factor in the demand for gold. Is it really as simple as an improving economy and a more affordable metal for that jewelry? It seems so. Central banks added gold as well, and investor demand was called stable by the World Gold Council.

Some 571 tonnes of the total 1,074 in first-quarter demand was jewelry. This was the strongest first-quarter demand for the jewelry sector since 2005 — long before the recession. We also could not help but notice that the 570.7 tonnes of demand was barely lower on a sequential basis as the demand was 573.4 tonnes in the fourth quarter of 2013.

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There was some spot of weakness out there. The first-quarter demand from the technology sector was 99 tonnes, down from 103.5 tonnes in the first quarter of 2013, and even slower in annualized trends versus 2012 as well.

Investment was called stable by the World Gold Council’s report, but this seems very subjective and sugar-coated by our read. Exchange traded funds (ETFs), such as the SPDR Gold Trust (NYSEMKT: GLD) and others, saw a drop of 0.2 tonnes in demand in the first quarter, but that was massively better than the outflows of 176.5 tonnes a year earlier. Demand for gold bars was 216.4 tonnes in the first quarter of 2014, versus 356 tonnes in the first quarter of 2013. Official gold coin demand was down to 52.1 tonnes in the first quarter of 2014, versus 77.9 tonnes in the first quarter of 2013.

While Central banks added 122.4 tonnes of gold to their reserves in the first quarter of 2014, that was down from the 130.8 tonnes purchased in the first quarter of 2013.

The World Gold Council’s report on first-quarter demand might have ended up far different had it not been for a massive drop in the outflows of ETFs and other pooled-investment funds and trusts. In fact, some of the demand strength may have solely been tied to less cumulative selling from investors rather than due to great buying.

Full World Council Report

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