According to Thomson Reuters' GFMS Gold Survey 2018, jewellery fabrication rose 13% on the year to 2214t, mainly due to a 58% increase in demand from India as the market stocked up before the good and service tax is implemented mid-year.
This was partly offset by Chinese jewellery fabrication demand dropping 3%, the lowest fall since 2013, which analysts said showed the market had broadly stabilised.
Industrial demand for gold rose 4% year-on-year in 2017 to 380t, the first increase since 2010. The climb was led by the electronics sector where the bulk of industrial demand was found.
On the other hand, total identifiable investment fell 24% in 2017 to 1,205t due to lacklustre coin demand at 248t, down 3.5% from 2016 and at the lowest level since 2007.
Bar demand also slipped 1% to 780t, due to a lack of price action and competition from other asset classes.
The only investment sector that saw gains was ETF inventory, which rose 177t in 2017 for a net dollar inflow of $7.3 billion, which resulted in ETF holdings of 2,262t at the end of the year, up 9%.
On the supply side, Thomson Reuters analysts found that global mine production was largely steady on the year at 3,247t, although slightly down due to environmental concerns in China and a crackdown on illegal mining in Indonesia.
"Further efforts were also noted in Peru and Colombia, where police and military interventions to flush out illegal miners from key areas in the rainforest region led to a drop in output year-on-year," the analyst said.
These factors were offset by noticeable gains in Russian production, supported by Polyus' Olimpiada mine ramp-up, while US production rose 8t due to new projects and higher grades at two key operations.
Meanwhile, global scrap supply fell 7% in 2017 to 1,210t, the first annual decline since 2014.
"Falls were wide spread as a stable dollar gold price and stronger domestic currencies kept gold prices contained, with the lower price failing to illicit tightly held stocks," according to the report.
With demand rising and production stable, the physical gold surplus dropped 55% to 427t. The previous year's surplus of 959t had been the highest since 2009.
Thomson Reuters analysts forecast the gold price to average $1,360/oz in 2018, with the potential to peak at $1,500/oz on any external shocks.
They saw the geopolitical climate and equity markets expected as continued supporters of gold's role as a risk hedge.
"Political uncertainty, including Brexit negotiations, along with ongoing tensions in the Middle East will remain gold's key drivers," they said.
