Gold Loses Appeal As Cryptocurrencies Rise And Shine

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Gold seems to have lost its shine as the world’s leading store of value for investors with the advent of cryptocurrency.

The soaring value of Bitcoin and other digital currencies towards the end of 2017 looks to have rubbed off on the popularity of the precious metal.

Demand for gold hit the lowest level since the first quarter of 2008 in the first three months of 2018, according to trade association The World Gold Council.

How gold is faring…and it’s not good

In a review for Q1 2018, the council reports:

  • Global demand for gold bars and coins plunged 15% led by a lack of interest in China, Germany and the USA
  • Exchange Traded Funds (ETFS) had a mixed month with demand and interest rates rising but spiking market prices. Investment demand for the quarter was down 27%
  • The consumer jewellery trade was flat – down 1% – although demand was up in the US, buyers stayed away in India due to rising prices
  • Central banks bolstered gold reserves, buying 116.5 tonnes of the precious metal – the highest amount in four years – a marked 42% increase over 82 tonnes purchased in the first three months of 2017.
  • Technology demand for gold was up 4% as makers of smartphones, gaming consoles and security systems increased production

Demand falls 7% in a year

Alistair Hewitt, head of market intelligence at the World Gold Council, said: “Relatively solid global economic growth, coupled with the return of volatility in the capital markets in February, created a stable environment for gold in the first quarter of 2018 – while equity markets around the world came under pressure, the gold price rose.

“Although demand was down year-on-year, 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. Solid inflows into central bank reserves also highlight the ongoing relevance of gold as a strategic asset for institutional investors.”

Overall global gold demand hit 973 tonnes in Q1 2018 – 7% down year-on-year.

Supply was up 3% to 1,064 tonnes, compared with 1,032 tonnes for the same time last year.