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Gold Demand Trends and The Impact of Covid-19

By Andrew Naylor, Head of ASEAN and Public Policy, World Gold Council

Published on June 10, 2020

At the end of April, the World Gold Council published its first quarter Gold Demand Trends. Gold demand inched up to 1,083.8 tonnes in Q1, supported by investment.

Unsurprisingly, the Covid-19 pandemic has had an impact. It has fuelled safe-haven investment demand for gold, offsetting marked weakness in consumer-focused sectors of the market. Investment demand – driven by economic uncertainty – has resulted in record inflows into gold-backed exchange-traded funds (ETFs) and similar products. As the scale of the pandemic and its potential economic impact started to emerge, investors sought safe-haven assets. Gold-backed ETFs and similar products attracted huge inflows (+298 tonnes), which pushed global holdings in these products to a new record high of 3,185 tonnes.

COVID-19 HAS FUELLED SAFE-HAVEN INVESTMENT DEMAND FOR GOLD, OFFSETTING MARKED WEAKNESS IN CONSUMER-FOCUSED SECTORS OF THE MARKET.

This has offset weaknesses in consumer demand, particularly the jewellery market. A combination of lockdowns and consumer uncertainty has seen demand for jewellery fall. Quarterly demand dropped 39% year-on-year to a record low for our series of 325.8 tonnes. Central banks continued to be significant buyers of gold, although at a lower rate than in Q1 2019: net purchases amounted to 145 tonnes (-8% year-on-year).

It is fair to say that the pandemic has had an unprecedented impact. It has disrupted global supply chains, paused large sections of the economy, put huge pressures on governments, and knocked consumer confidence. Higher risk and uncertainty, combined with a lower opportunity cost, will likely be supportive of gold investment demand in 2020. This could continue to offset the negative effect of lower consumer demand on gold performance as economic activity contracts.

It is clear the global economic outlook is highly uncertain, and as governments grapple with deficits and the need to kick-start the global economy, gold will play an ever-increasing role in investment portfolios.

THE FUTURE

The uncertain economic outlook and the potential for a second wave mean a low-interest environment is here to stay for the foreseeable future. In this environment, investment interest in liquid, wealth-preserving safe-haven assets like gold will grow. For the World Gold Council, this means a lot of our focus will be increasing the understanding wealth managers and asset allocators have of gold. Singapore, as a leading wealth management hub with over $2.7 trillion of assets under management, is a key nexus in the wealth management ecosystem.

As part of our efforts to increase understanding of gold, last year we launched Qaurum, a web-based quantitative tool that helps investors intuitively understand the drivers of gold’s performance by demonstrating how gold may react across different macroeconomic environments. In May, we updated the macroeconomic scenarios behind Qaurum to reflect the latest perspectives from Oxford Economics, which include the potential impact of Covid-19 on the global economy.

There is work to be done on the retail side too. Interest in fintech and digital gold products is increasing. Digitally managed products play an important role in democratising access to gold and opening the asset class to the retail market, but best practice must be adopted in this sector so consumers can feel confident in this important market segment. To this end, the World Gold Council has created the Retail Gold Investment Principles – a set of principles for the retail gold market designed to set the bar for product providers and further encourage retail investors to place their trust in gold. It is envisaged that greater trust will benefit customers and product providers alike, creating value and driving demand across the retail gold industry.

DIGITALLY MANAGED PRODUCTS PLAY AN IMPORTANT ROLE IN DEMOCRATISING ACCESS TO GOLD AND OPENING THE ASSET CLASS TO THE RETAIL MARKET, BUT BEST PRACTICE MUST BE ADOPTED IN THIS SECTOR SO CONSUMERS CAN FEEL CONFIDENT IN THIS IMPORTANT MARKET SEGMENT.

We undertook an industry survey earlier this year. The response is being analysed, and a further round of intensive industry engagement will take place later this year. Finally, work continues to address key environmental, social and governance (ESG) issues for the gold mining sector.

DRIVING SUSTAINABILITY

Last year we launched the Responsible Gold Mining Principles – a new framework that sets out clear expectations for consumers, investors, and the downstream gold supply chain as to what constitutes responsible gold mining. It is our aim that these principles will become a credible and widely recognised framework through which gold mining companies can provide confidence that their gold has been produced responsibly.

The Responsible Gold Mining Principles are intended to recognise and consolidate existing standards and instruments under a single framework. Several leading standards already exist that address specific aspects of responsible gold mining, including the United Nations Guiding Principles on Business and Human Rights, the OECD Due Diligence Guidance for Responsible Business Conduct and the Extractive Industries Transparency Initiative, Guidelines for Multinational Enterprises and the International Council on Mining and Metals’ (ICMM) Performance Expectations. But before the development of the Responsible Gold Mining Principles, there was no single coherent framework that defined responsible gold mining.

THE RESPONSIBLE GOLD MINING PRINCIPLES IS A NEW FRAMEWORK THAT SETS OUT CLEAR EXPECTATIONS FOR CONSUMERS, INVESTORS, AND THE DOWNSTREAM GOLD SUPPLY CHAIN AS TO WHAT CONSTITUTES RESPONSIBLE GOLD MINING.

Coronavirus ignited safe-haven ETF inflows, but undermined consumer demand

Source: World Gold Council, Gold Demand Trends Q1 2020

Sustainable finance is growing fast – a recent survey suggested nearly 75% of young Singaporeans are keen to ensure their investments are sustainable. And on the regulatory and market development side, the Monetary Authority of Singapore (MAS) is leading the way to ensure Singapore’s financial sector incorporates ESG considerations into financial decisions. Going forward, the World Gold Council will continue to help increase awareness of the work the industry is doing to drive sustainability, and the role that gold plays in sustainable investment portfolios.

ANDREW NAYLOR joined the World Gold Council in 2016 and is responsible for the WGC’s activities in the region – institutional investment, government relations, and public policy initiatives. Prior to this role, he worked for international consultancy firm Cicero Group advising financial institutions on foreign investment and trade policy in Asia and regulatory reform. Andrew has been a board member of the European Chamber of Commerce in Singapore since 2012 and was chairman of its financial services committee from 2012 to 2014, and treasurer from 2014 to 2016. Andrew has a degree from the London School of Economics and Political Science.

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Lee Jia Yi

OPERATIONS & ADMIN EXECUTIVE
Before joining SBMA, Jia Yi worked as an Admin & Reporting Officer in her previous role. She holds a Diploma in Business & Social Enterprise from Ngee Ann Polytechnic. Jia Yi is responsible for managing and maintaining physical and digital files in SBMA, supporting invoicing processes, reconciling receivables and payables, coordinating meetings and conferences. Additionally, she will provide support to the team and assist the Business Director in managing the Association’s office operations and general administrative activities.

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Emily Oh

OPERATIONS & ADMIN EXECUTIVE
Emily Oh is the Operations & Admin Executive, a seasoned professional who values teamwork and effective communication. She is skilled at adapting to new challenges and takes a proactive and resourceful approach to every task. Before joining SBMA, Emily had experience coordinating international travel arrangements and spearheading community initiatives. Her role at SBMA will be providing operational and administrative support for projects and other matters to the team.

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Clara Chang

MARKETING & COMMUNICATIONS EXECUTIVE
Clara Chang joins SBMA as the Marketing & Communications Executive, enriching the team with her extensive experience in content creation, social media management, and digital marketing. Prior to joining SBMA, Clara held the position of Marketing Executive at her previous job. She holds two bachelor’s degrees from the University at Buffalo, one in International Trade and another in Geographical Information Science. Her core duties will include maintaining the SBMA website, managing the quarterly Crucible newsletter, among other responsibilities.

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Mr John Levin

Global Metals
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John Levin is the Head of Metal Sales & Trading – APAC at the Toronto Dominion Bank’s Singapore office. Prior to this role, he devoted seven years to leading precious metal sales for the ANZ banking group in his home country, Australia. Notably, from 2009 to 2011, John played a significant role on the management committee of the London Bullion Market Association while serving as the Head of Precious Metals Sales for HSBC Global Banking and Markets in the UK.

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Fabian Lew

MARKETING & COMMUNICATIONS OFFICER

Fabian was a Business Development and Marketing Associate before joining SBMA. He graduated from Singapore Management University with a Bachelor’s degree in Economics.

He has joined SBMA since February, 2022.

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Margaret Wong

BUSINESS DIRECTOR

Margaret Wong, Business Director at SBMA (Singapore Bullion Market Association), brought valuable experience from her previous role at the World Gold Council (WGC). Her tenure at WGC provided her with extensive exposure to the gold community in Singapore and the broader region. This background has been instrumental in establishing strong working relationships within the industry.

Margaret’s role at SBMA encompasses a diverse range of responsibilities. She oversees office management, business support processes, finance, and administrative functions essential for the smooth operation of the team and management committee. Additionally, Margaret handles membership matters, member communications, and addresses public inquiries related to SBMA.

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Albert Cheng

Chief Executive Officer

Albert Cheng joined the World Gold Council in March 1993 as a Regional Manager, becoming Managing Director, Far East in 2003. He retired at the end of March 2015 and was subsequently named its Advisor. He has also been an International Advisor to the Shanghai Gold Exchange since 2002.

His marketing career began with Dentsu Young & Rubicam, Hong Kong in the early 80’s. He began gold marketing in July 1985 when he joined the Royal Canadian Mint as a Regional Manager for Southeast Asia.

He was appointed honorary CEO of SBMA in November 2015. He is responsible for the success and strategic development of SBMA, represents the interests of the Association, and is responsible for all the legal and regulatory aspects of the work of the Association. He is the primary contact for regulators and government bodies on bullion market development.

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Ms Pawan Nawawattanasub

CEO
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Pawan is the CEO of YLG Bullion Singapore and founder of YLG Bullion International. She has almost 40 years of experience in the jewellery industry and established YLG in Thailand in 2003. In 2012, she brought YLG to Singapore. She sits on the Board of Directors of the Thailand Gold Traders Association, the Thailand Futures Exchange’s Arbitration Committee, and the Rotary Bangkok committee. She holds a master’s degree in Political Science.

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Mr Shaokai Fan

Head of Asia-Pacific (ex China) and Global Head of Central Banks
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Mr Alan Liew

Head of Bullion & Commodities Trading
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Mr Nikos Kavalis

Managing Director
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CEO
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Mr Raman Walia

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Mr Andrew Clarke

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Mr Kazuya Naoki

Head of Metals, Asia
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Kazuya (Kaz) Naoki is the Head of Metals, Asia of ICBC Standard Bank in Singapore and is responsible for the precious & base metals sales and trading in the region. He joined Standard Bank Plc Tokyo Branch in 2008 and was relocated to its Singapore Branch in 2013 whose controlling stake was acquired by the Industrial and Commercial Bank of China in 2015. Prior to joining Standard Bank, Kaz spent 11 years focusing on commodity trading and risk management with Mitsui & Co in Tokyo, Sydney and London. Kaz has been serving on the SBMA Management Committee since 2016.

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Mr Vinh Nguyen

Head of Precious Metals, Asia
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Vinh Nguyen joined StoneX Group in Singapore at the beginning of 2008 and responsible for its APAC precious metals activities since 2019 until now.

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Mr KL Yap

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