Demand for gold falls into four categories:

  • jewellery;
  • central bank purchases;
  • investment;
  • technology.

In 2016 overall demand increased to three-year high of 4,308.7 tonnes or by 2% compared to 4,215.8 in 2015. The growth was a result of investment demand increase due to the high annual inflows into gold ETFs which reached 531.9 tonnes, the second highest on record. Declines in jewellery and central bank purchases partially offset this growth.

Annual bar and coin demand was broadly stable at 1,029.2 tonnes, helped by restoring in Q4 2016. Last quarter of 2016 was the strongest quarter for bar and coin demand in China since Q2 2013 mainly driven by the sharp reduction in gold price.

The gold price ended the year up 8%. Having risen by 25% by the end of September, gold relinquished some of its gains in Q4 following President Trumps conciliatory acceptance speech and the FOMC’s interest rate rise.

2016 saw a seven-year low for jewellery demand. Rising prices for much of the year, regulatory and fiscal hurdles in India and China’s softening economy were key reasons for weakness in the sector.

India’s unexpected demonetisation policy brought the market to a virtual standstill. An initial rush for gold following the policy announcement came to a swift halt in the ensuing cash crunch.

Central bank demand was the lowest since 2010. Net purchases (383.6 tonnes) were 33% lower than 2015, due in part to increased pressure on FX reserves. Despite this, 2016 was the 7th consecutive year of net purchases by central banks.

Gold demand

2016 2015 YoY Change YoY Change, %
Jewellery2,041.6 2,388.6 -347.0 -15
Technology 322.5 332.0 -9.5 -3
Investment1,561.1 918.7 642.4 70
Central banks/ other institutions 383.6576.5 -192.9 -33
Total gold demand 4,308.7 4,215.8 92.9 2


Total global jewellery demand was down by 15%. The two largest markets, India and China, together accounted for almost 80% of the 347.0 tonnes decline in full-year demand in 2016.

Indian annual jewellery demand fell by 22% to a 7-year low of 514.0 tonnes amid strikes, regulation and high gold prices. This decrease was the biggest yearly decline recorded in World Gold Council historical data. In Q1, the Indian jewellers’ strike effectively shut down the gold industry. Further difficulties arose when the government’s clampdown on undeclared income drove an element of gold demand into the shadier grey market. This created additional difficulties in collecting data by World Gold Council.

In China, jewellery demand declined by 17% to 629.0 tonnes in 2016. The trend that younger Chinese prefer to spend their income on experiences such as travel, rather than on material things, including gold jewellery continued in 2016. As the number of domestic tourists soared from the previous year, sales of gold jewellery slumped. Disappointing holiday sales contributed to a 13% y-o-y decline in Q4 2016 jewellery demand in China. Despite the fall in the gold price, gold jewellery demand fell far short of expectations during October’s “Golden Week” national holiday.

Across other markets the impact on the gold demand was less significant. Japan is the only country in Asian market where demand slightly increased by 2%. In the Middle East and Turkey regional demand declined by 16% due to low oil prices. In the US, UK and other Europe countries demand also fell by 1–4% annually.

Central banks and other institutions

Central banks bought 383.6 tonnes on a net basis in 2016 wich is 33% lower than in 2015. Quarterly net purchases were strongest at the start and end of the year. In the Q4 demand of 114.4 tonnes was the highest during 2016 but 32% lower compared to the same period in 2015.

The slowdown in purchases and an increase in sales can be partly attributed to pressure on FX reserves. Reserves management has become especially challenging. China is a noteworthy example, having seen its FX reserves fall by over US$300 billion (10%) over the course of 2016.

Among largest purchasers were Russia, Kazakhstan and China, which together bought around 80% of the full year figure. Purchases by China, despite being one of the biggest buyers during the year, came to a halt in November and December. And several central banks have reduced their gold holdings: Venezuela, Azerbaijan, Argentina and Jordan all reported a drop in reserves.

Top-10 reported official gold holdings (as at December 2016)

Tonnes % of reserves
1. United States 8,133.5 74%
2. Germany 3,377.9 68%
3. IMF 2,814.0
4. Italy 2,451.8 67%
5. France 2,435.6 62%
6. China 1,842.6 2%
7. Russia 1,615.2 15%
8. Switzerland 1,040.0 6%
9. Japan 765.2 2%
10. Netherlands 612.5 63%

Source: World Gold Council


Investment demand was up 70%, reaching its highest level since 2012. Annual ETF (exchange-traded fund) inflows were the strongest since 2009. Investment started the year strongly, slowing slightly in the second half, before ending the year with a bout of profit taking, especially in the US listed funds.

Retail investors’ positive response to the price fall in October and November pushed Q4 bar and coin demand to its highest quarterly level since Q2 2013.Annual bar and coin demand was broadly stable at 1,029.2 tonnes. Demand was exceptionally soft up until the fourth quarter, when investors took advantage of lower prices in October and November.


Gold demand in the technology declined by 3% to 322.5 tonnes in 2016 compared to 332.0 in 2015. Q1 was the weakest quarter mainly due to global economic uncertainty, higher gold prices and substitution, squeezed the full year total. The Q4 was the stronger quarter since Q2 2015.

In electronics demand declined by 3% to 254.5 tonnes in 2016. But it grew by 4% YoY to 66.9 tonnes in Q4, as a result of increased demand for gold bonding wire and Printed Circuit Boards (PCBs). While demand slowed in the LED and wireless sectors, rampant growth in the gold bonding wire and PCB industries lifted the quarterly total to positive territory.

  • (1) Unless otherwise indicated, indicators’ source: World Gold Council.


tel.+7 495 644 44 73

Irina Dormidontova

tel.+7 495 644 44 73


tel.+7 495 644 4473 #707 6746