FACTBOX - Gold supply and demand from GFMS report

LONDON Thu Apr 4, 2013 6:04pm IST

One-kg 24K gold and silver bars are displayed at the Chinese Gold and Silver Exchange Society, Hong Kong's major gold and silver exchange, during the first trading day after the Chinese New Year holidays, in Hong Kong February 14, 2013. REUTERS/Bobby Yip

One-kg 24K gold and silver bars are displayed at the Chinese Gold and Silver Exchange Society, Hong Kong's major gold and silver exchange, during the first trading day after the Chinese New Year holidays, in Hong Kong February 14, 2013.

Credit: Reuters/Bobby Yip

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LONDON (Reuters) - Gold mine production rose to a record high in 2012, while jewellery fabrication fell 4.2 percent, mainly due to a drop in demand in India along with a fall in the rupee, metals consultancy GFMS said on Thursday.

Soaring investment in exchange-traded funds (ETFs) helped cushion the impact of lower off-take for jewellery and falling physical bar buying, it added.

Below are key supply and demand factors in the 2012 gold market. Spot gold was quoted at $1,545.96 an ounce by 1133 GMT on Thursday.

DEMAND

- Jewellery fabrication eased for a second consecutive year to 1,893 tonnes in 2012 from 1,975 tonnes in 2011, leading to an overall decline in gold fabrication to 2,613 tonnes from 2,760.

- India's gold carat jewellery fabrication slipped to 618.20 tonnes from 667 tonnes in 2011, a drop of 7.3 percent, while the rupee gold price rose by 24 percent.

- Chinese jewellery consumption edged up by 0.6 percent to a record 498.40 tonnes.

- Demand from major Western jewellery fabricators declined, with off-take down 8 percent in Italy and 6 percent in the United States.

- World investment in gold, which covers implied net investment, coin and bar buying, eased 2 percent to a four-year low of 1,605 tonnes. Implied net investment nearly trebled to 294 tonnes compared with 2011, although remaining well below 2009 record levels of 1,130 tonnes.

- GFMS attributed the overall drop to lower investment in physical bars, with declines recorded across major markets. Bar hoarding fell 17 percent to 998 tonnes from a record 1,198 tonnes in 2011. This was again the largest investment element, but its dominance was reduced to 62 percent of world investment last year, compared with 73 percent in 2011.

- Europe and India saw particularly significant decreases in physical bar investment last year, with buying down 29 percent to 274 tonnes and 205.90 tonnes, respectively.

- The futures and over-the-counter markets remained broadly neutral on a net basis last year, with net Comex positions up 77 tonnes to 587 tonnes and a small amount of disinvestment on the OTC market.

- Holdings of exchange-traded funds edged higher to reach new record levels, ending the year at around 2,691 tonnes. Inflows rose 279 tonnes or 12 percent after a major slowdown in 2011.

SUPPLY

- Global gold mine output increased by a modest 22 tonnes to a record 2,861 tonnes in a fourth year of growth. China remained the number one producer of mined gold, with output up 42.10 tonnes to 413.10 tonnes last year.

- It was followed by Australia, which supplied 250.10 tonnes, the United States, Russia and Peru, which ousted South Africa as the fifth-biggest producer.

- World cash costs for gold miners rose 12 percent to $738 an ounce in 2012, compared with $643 in 2011. Total production costs, including depreciated capital expenditure, increased to $1,211 an ounce from $809.

- The rise in mine output was more than offset by a decline of 52 tonnes, or 3 percent, to 1,616 tonnes in recycled material returning to the market.

- Net central bank purchases jumped by 16 percent to a 48-year high of 532 tonnes in 2012, boasted by a further drop in sales from signatories to the third Central Bank Gold Agreement (CBGA).

(Compiled By Clara Denina; Editing By Veronica Brown and Jane Baird)

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