• Global gold demand fell, but central bank buying grew
• Chinese consumer demand recovered, while Indian demand weakened
• Zimbabwe's gold output declined due to various challenges

Global gold demand experienced a mixed picture in the first quarter of 2023, according to the latest quarterly demand trends report released by the World Gold Council (WGC). The total demand for gold in Q1 2023 amounted to 1,081 tonnes, a 13% decline from the same period in 2022. This drop was attributed to reduced investor buying, which offset large purchases made by central banks and Chinese consumers. Bar and coin investment, however, experienced a 5% year-on-year growth to 302 tonnes. Meanwhile, net negative demand for ETFs, although modest at -29 tonnes, generated a significant decline compared with the sizable inflows seen in Q1 2022.

The LBMA Gold Price (PM) averaged US$1,890/oz in Q1 2023, marginally higher year-on-year. The price was over 10% higher than the previous quarter's average, almost matching the Q3 2020 record high. China saw a strong relief rally in the first post-COVID quarter of unfettered consumer spending. The recovering domestic economy and healthy income growth reignited domestic consumption, while the eye-catching gold price performance spurred investment interest. On the other hand, Indian demand fell sharply as local gold prices applied the brakes. Record high and volatile domestic gold prices discouraged both investment and jewellery consumption during the quarter.

The outlook for gold in 2023 is dominated by investment, with healthy upside expected this year. The picture for fabrication (jewellery and technology) is more muted. Furthermore, robust central bank buying is expected, albeit below 2022's record. Modest growth is likely in both mine production and recycling.

Zimbabwe Gold Deliveries overview

Turning to Africa, Zimbabwe's gold output plunged to 6.2 tonnes in the first three months to March 2023, down 19.5% from 7.7 tonnes delivered in the same period last year. The latest report by Fidelity Gold Refinery shows that the decrease in gold production was attributed to a lack of equipment among small producers to dewater flooded pits during the rainy season. However, this decline was also due to erratic power supplies, the Zimbabwe dollar case, and an aggressive tax regime. This drop in gold output comes amid an ambitious target set by the mines minister Winston Chitando to grow gold output to 40 tonnes by 2023, with the yellow metal expected to contribute US$4 billion of the revenue of an ambitious US$12 billion mining industry target. However, the revised targets are further at risk due to corruption, power challenges, lack of accountability, and chiefly, lack of small-scale miners’ empowerment.

In conclusion, the first quarter of 2023 saw a mixed picture for gold demand globally, with robust central bank buying, a recovery in Chinese consumer demand, and growth in bar and coin investment offset by reduced investor buying and weakness in India. The outlook for gold in 2023 is dominated by investment, with healthy upside expected. In Africa, Zimbabwe's gold output plunged due to various challenges, including a lack of equipment among small producers, erratic power supplies, the Zimbabwe dollar case, and an aggressive tax regime, which puts the ambitious mining industry target at risk.

-Equity Axis News