Last week the World Gold Council (WGC) released its highly-anticipated Gold Demand Trends (GDT) report for Q4 and full-year 2009. GDT reports contain analysis of independent data compiled by GFMS Limited detailing supply and demand trends in the global gold market. They are jam-packed with key fundamental reads that undergird gold’s secular bull.
Generally only select groups of industry stakeholders and traders are the ones who anticipate these reports. Most people couldn’t care less what they say, and if you mention WGC they’ll think you’re talking about golf. But with gold gaining mainstream popularity in recent years, GDT reports are now a lot more relevant.
CNBC even gave face time to one of the WGC’s executives to discuss this report on the day of its release. And being the consummate gold skeptic, CNBC centered in on the fact that identifiable gold demand was down 11% in 2009. The talking heads just couldn’t understand how gold prices could remain strong in this environment, especially with supply up 11% over this same time period. The WGC exec of course held his composure, expecting the tough questions, and methodically explained why the gold market was still healthy.
At Zeal we’ll discuss this latest GDT report in the upcoming March issue of our acclaimed monthly newsletter, and I highly encourage you to peruse it on your own if you are the least bit interested in gold. As you’ll see in its contents, this precious metal was not immune to wild 2009 markets that were colored by global economic woes, the reverberations of an infamous stock panic, and a spectacular recovery.
Quickly on the demand front, this 11% slide was frontloaded in an anomalous Q1. With virtually all spending grinding to a halt, jewelry consumption (gold’s largest demand component) from Q4 2008 to Q1 2009 tanked by a whopping 38%! Jewelry demand eventually returned over the next 3 quarters when folks realized we weren’t spiraling into the next Great Depression, but the damage had been done.
Year-over-year jewelry and industrial demand were down 20% and 16% respectively. These figures alone are indeed chilling, but the resiliency of the gold market shined amidst adversity. One of the main reasons 2009’s average gold price was 12% higher than 2008’s is growing investment demand.
In the face of economic uncertainty gold’s intrinsic appeal has really…
