LONDON (Bloomberg) - Gold demand fell for a third year on a slump in purchases from China, costing the country its place as the world's biggest buyer.
Global demand slid 4 per cent to a five-year low of 3,923.7 metric tons in 2014, the World Gold Council said in a report on Thursday. In China, purchases of bars and coins for investment dropped by 50 per cent and jewelry buying retreated from a record, according to the London-based group.
The strengthening US dollar and prospects for higher U.S. interest rates have curbed gold's appeal as a protection of wealth, leading to two years of falling prices. While the metal has rebounded over the past three months, it's still within 10 per cent of a four-year low.
"2014 was a year of stabilization," Alistair Hewitt, head of market intelligence at the council, said in a phone interview from London on Wednesday. "We saw bar and coin demand decline substantially both in India and China." Gold rose 3.2 per cent to US$1,222.62 an ounce in London this year.
India took China's spot as biggest buyer of the metal, reclaiming the position it last held in 2012, after jewelry demand jumped to the highest level since at least 1995.
Purchases of necklaces, bracelets and earrings by Indian shoppers rose 8 percent even amid import restrictions, while Chinese consumers bought 33 per cent less. Combined bar and coin investment was down 50 per cent in both countries.
It's too close to call which country will be the biggest buyer this year, with annual demand in both countries forecast at 900 to 1,000 tons, Hewitt said. For the fourth quarter, global demand totaled 987.5 tons, up about 6 per cent from a year earlier.
Investors in exchange-traded products backed by gold continued to reduce their holdings. Sales totaled 164.4 tons in 2014 as ETF assets approached a five-year low, data compiled by Bloomberg show. The drop in holdings was 869.1 tons in 2013.
Central banks added the metal to reserves for a fifth straight year, buying 477.2 tons, 17 per cent more than in 2013 and the second-highest amount in the past 50 years. Demand from the technology industry fell almost 5 per cent to 389 tons last year, the lowest level since 2003.
Recycling contracted 11 per cent to a seven-year low of 1,121.7 tons, according to the gold council. Mine production rose 2 per cent to a record 3,114.4 tons.