Global gold demand has met with a fall of 10% in Q2, when compared with the demand of the same period last year.
According the World Gold Council’s latest Gold Demand Trends report, this can be seen as part of a 14% decline in the demand for the first half of 2017.
After record levels of inflows into Exchange Traded Funds (ETFs) in H1 2016, a significant slowdown in the sector is the suspected cause of the large drop in demand. The Net Central Bank purchased less gold in the first half of 2017 (177t), dropping 3% when compared to the same period in 2016. Despite this, H1 2017 saw growth in bar and coin investment, as well as jewellery and technology demand, making slight gains when compared to 2016.
Though ETF inflows slowed down from last year’s record pace, holdings in the sector continued to grow, adding 56t in Q2, making inflows in H1: 168t. European ETFs saw the strongest H1 inflows, with holdings in these funds reaching 978t.
As mentioned, bar and coin investment rebounded from very low levels last year. Q2 demand gained 13% from Q2 2016 to 241t, while H1 demand rose 11% to 532t. India proved a strong market for demand in this sector, perhaps owing to the previous year’s weak demand. similarly, Turkey saw a huge jump in demand, due to the countries double-digit inflation, currency stability and overall economic recovery.
Jewellery demand also strengthened from a weak 2016 to 481t, but fell short of the long-term average. India was the main contributor to the 8% gain in Q2.
Technology demand proved to have its third consecutive quarter of growth, up 2% to 81t. The demand has grown through increasing adoption of wireless charging and the development of features using LEDs. New smartphone handsets also supported memory chip production, which upped demand even more.
Alistair Hewitt, Head of Market Intelligence at the World Gold Council, commented: “There are a few things to watch out for in the rest of the year. Inflation data out of the US looks soft and markets have pushed out their expectations for a rate rise. The monsoon is looking good in India and, providing the market adapts to the new GST, we may see solid demand around Diwali. And as the next generation of smartphones gets rolled out we may see good support for technology demand.”
Total supply fell 8% to 1,066t this quarter compared with the same period last year. This was largely led by a steep drop in recycling, down 18% to 280t, and Mine production remaining virtually flat, falling just 3t to 791t.
The key findings included in the Gold Demand Trends Q2 2017 report are as follows:
- Overall demand was 953t, a fall of 10%
- Total consumer demand rose by 9% to 722t
- Total investment demand fell 34% to 297t
- Global jewellery demand grew 8% to 481t
- Central bank demand climbed 20% to 94t
- Demand in the technology sector increased 2% to 81t
- Total supply was down 8% to 1,066t
- Recycling fell 18% to 280t