Gold may have lost favour among western investors this past year, but 'grass roots' buyers still showed healthy appetites for the precious metal, according to Thomson Reuters GFMS' latest gold survey.
The data shows that gold fabrication was up 11% in 2013 and bar hoarding was at record highs, as the price decline spurred a 'frenzy' of buying across Asian markets and a major geographical shift in gold demand over the second half of 2013.
Rhona O’Connell, a head researcher at Thomson Reuters, noted that "while the professional market seemed to be obsessed with the 'tapering' issue in the United States, private individuals in the traditional gold investing countries had no such qualms and as the price tumbled in the second quarter, hordes of these buyers appeared in the market."
As expected, China overtook India as the world's biggest gold consumer, adding to the already long list of what China consumes more than any other country. The Asian giant sparked a surge in gold jewellery fabrication and posted the largest percentage year-on-year increase in jewellery demand in two decades.
Researchers see physical demand for jewellery, bars, coins and industrial uses as strong enough to support average prices above $1,200 this year.
As for central bank buying, the survey notes that many became "wary of buying," holding off for potential further price declines. It's estimated that central bank purhcases dropped by about 34% in 2013, though researchers expect them to remain a net buyer of gold in the first half of 2014.
And while net official sector purchases dropped by 34% last year, 2013 was still a historically high year for gold and the slump should be taken into context: 2012 purchases were the highest since the 1960s.
Compared with the preceding year, 2013 was not kind to gold. Physical investment was a net 458 tonnes, compared with 1,285 tonnes in 2012. Researchers expect this trend to persist into 2014.
"While there is the clear possibility of a short-covering rally in the first quarter of 2014, that could build on the recent stabilisation above $1,185 and possibly generate a test of $1,330 before the quarter is out, the gold market has not regained the sparkle of 2008 – late 2011, and is not expected to do so," the report reads.
Researchers expect gold to show a more "traditionally seasonal pattern that has been the case in recent years," as indications of economic recovery continue to drive investment away from the precious metal. The average price forecast for 2014 is now at $1,225 for 2014 – 13% below 2013.