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Global demand for gold plummeted 14 per cent in 2020 to an 11-year low of 3,759.6 tonne, showed the the World Gold Council's latest 'Gold Demand Trends' report.

It was the first time since 2009 that gold demand plunged below the 4,000 tonne mark.

The decline in annual demand is largely attributed to the 28 per cent year-on-year (YoY) fall to 783.4 tonne in the fourth quarter of 2020, making it the weakest quarter since the midst of the global financial crisis in Q2, 2008.

Gold jewellery demand in Q4 fell 13 per cent Y-o-Y to 515.9 tonne, resulting in a full-year total of 1,411.6 tonne, 34 per cent lower than in 2019 and a new annual low for WGC's data series, said its statement.

While demand improved steadily from the severely depleted numbers in Q2, the coronavirus continued to impact consumer behaviour, it added.

On the other hand, increased uncertainty and policy response to the pandemic supported annual investment demand, which increased 40 per cent Y-o-Y to a new high of 1,773.2 tonne.

"Most of the growth came in the form of gold-backed ETFs (gold ETFs) but was aided by bar and coin demand growth in H2. In addition, evidence suggests that over-the-counter (OTC) activity was also robust throughout the year," said the World Gold Council's statement.

However, in Q4 there was a notable decline in investment demand for gold ETFs with outflows at 130 tonne.

Total annual gold supply also took a hit and was 4 per cent lower y-o-y (4,633 tonne), the largest annual fall since 2013. The drop can be largely explained by coronavirus-related disruption to mine production, offset by a marginal 1 per cent increase in recycling to 1,297.4 tonne for 2020, as per the WGC.

Inflows into global gold ETFs reached an annual record of 877.1 tonne, valued at $47.9 billion. An 11-month consecutive run of positive inflows starting in December 2019 came to a halt in November when a recovery in sentiment and gold price drop led to 130 tonne of outflows in Q4.

The US dollar gold price returned 25 per cent in 2020 supported by investor demand. After reaching a record high in August across most currencies, the LBMA Gold Price PM dropped back to $1,762.55/oz at the end of November, before recovering to close the year at $1,887.6/oz.

Demand for gold bars and coins grew 10 per cent in Q4. A recovery in China and India in the second half of 2020 added to continued strength in Western markets to lift annual demand to 896.1 tonne, up 3 per cent.

Further, 2020 marked a record low of 1,411.6 tonne for gold jewellery demand. Despite a quarterly recovery in Q4, demand was unable to overcome the continued challenges presented by COVID-19.

Gold buying by central banks slowed sharply in 2020, 59 per cent lower at 273 tonne.

Louise Street, Senior Markets Analyst, Research at the World Gold Council, commented: "The impact of the COVID-19 pandemic was felt across the gold market throughout 2020, and Q4 was no different. Consumers around the world remained at the mercy of lockdowns, economic weakness and high gold prices, resulting in a new annual low in jewellery demand.

"Nevertheless, despite outflows in Q4, gold-backed ETFs saw record annual inflows due to low interest rates and high levels of uncertainty, highlighting gold's role as a safe haven asset," she said.

Adding that bar and coin demand also saw a strong recovery in the second half of the year, indicating stability in the retail investor sentiments, Louise said: "Overall, we believe the effects of the pandemic are likely to reverberate into Q1 2021, and possibly beyond."