Refining services provider Heraeus Precious Metals finds in its latest appraisal publication that fabrication demand for gold fell significantly in the first quarter of the year, largely owing to gold’s stunning price rally in the first three months of the year.

However, what was lost in terms of pure consumption, was made up for in investment flows, which saw a surge – particularly in China.

Global gold consumption was at its second-lowest level since 2010 in the first quarter of the year at 514 t.

The largest gold consumer, China, saw jewellery consumption decline by almost 30% year-on-year in the first quarter to 135 t, while industrial demand for gold in the country also contracted by 4% year-on-year to 18 t.

The primary reason for the contraction was the gold price having trended 19% higher in the first quarter of this year at an average of more than $3 200/oz, compared with the first quarter of last year.

Conversely, demand for gold investment products was strong in the quarter, with physical bar and coin investment having grown by 170% year-on-year. Despite the sharp drop in China’s jewellery demand, its bar and coin demand grew by 30% year-on-year to 138 t in the quarter.

Global exchange-traded fund (ETF) holdings of gold also recorded positive inflows in the first quarter, although these holdings tended to fluctuate with the gold price as they are easier to trade on a short-term basis, unlike physical gold investment which carries higher premiums and tends to be a longer-term option for individual investors.

Heraeus suggested that, should the gold price correction continue, ETF flows could see a reversal as the investors following momentum exit.

The company explained that momentum was weighted towards the downside during Asian trading hours in the last week, suggesting Chinese traders who were largely behind the last phase of gold’s upward swing to $3 500/oz may have their short-term view on gold.

Net positioning across the exchanges almost entirely reversed since gold touched this level, as the gold price experienced its single-largest correction since November 2024 in the last week – falling 2.94% to close at $3 239/oz as support at $3 260/oz gave way.

In other precious metals, Heraeus reports a possible US recession could result in lower silver demand and potential price underperformance, relative to gold.

The Silver Institute forecasts that industrial silver demand will decrease by 0.5% this year to 677 t, though if the US slips into a recession the decline could be amplified.

The silver price has lagged behind gold over the last 12 months, pushing the gold-silver ratio from 73 at the end of May 2024 to a peak of 105.8 a few weeks ago.

Silver closed last week’s trading 3.14% lower at $32.13/oz.

In turn, platinum prices fell by 1.71% to $979/oz last week, Heraeus reports, explaining that the price continues to trade in the same range it had done for the last few years despite the platinum market remaining in deficit.

“Although the market was tighter in the first quarter, metal remained readily available,” the company said.

Lower automotive demand in the European automotive markets is impacting both platinum and palladium demand, with new heavy-duty truck registrations having contracted 16% year-on-year and passenger car sales having declined by 1.9% year-on-year in the first quarter.

Western European palladium autocatalyst demand is forecast to decrease by 8% year-on-year and reach below one-million ounces for the first time since 2009 this year.

The US and peripheral automotive markets are also expected to underperform initial expectations this year owing to the impact of the trade war. Downward revisions to global autocatalyst demand outweigh losses to primary supply, widening the expected market surplus this year compared with last year, which may weigh on the palladium price.

The palladium price traded between $940/oz and $975/oz last week before closing slightly lower week-on-week at $967/oz.

Notably, Heraeus expects demand for ruthenium to grow by more than 8% year-on-year to 275 000 oz this year, owing to increased hard drive orders for data centres. However, a company called Seagate is rolling out its non-ruthenium hard disk technology, which could represent a threat to ruthenium demand going forward.