Global gold demand falls in Q2 as ETF inflows decline

Global gold demand remained muted in the second quarter at 964 tonnes (t), down four percent year-on-year, according to a new report by the World Gold Council.

“Slower inflows into gold-backed exchange-traded funds (ETFs) created a weak comparison against the highs of last year, contributing to the lowest H1 demand since 2009,” the report said.

Meanwile China, the world’s largest gold market, saw a 7 percent rise in consumer demand.

ETF inflows slumped 46 percent YoY, but European-listed funds saw decent inflows, likely due to uncertainty stemming from Italian elections and monetary policy outlook.

On the other hand, holdings of North American-listed funds fell by 30.6t as investors focused on domestic economic strength.

Despite the decline in the second quarter, jewelry demand in H1 2018 was scarcely changed at 1,031t. 

Weaker demand in India and the Middle East last quarter was partly offset by growth in China and the US, with demand rising 5 percent YoY in both.

Indian demand fell 8 percent YoY, impacted by higher local prices, as well as by seasonal and religious factors.

Elsewhere, global bar and coin investment was virtually unchanged at 248t. 

Demand was in China and Iran, on account of increasing geopolitical tensions with the US. However, this was offset by falls in Turkey, India and Europe, where local prices remained elevated.

Central banks added 89t of gold to global official reserves in Q2 2018, down 7 percent compared with Q2 2017. 

“It’s interesting how investors around the world have reacted to some of the risks stalking financial markets,” said Alistair Hewitt, Head of Market Intelligence at the World Gold Council.

“Weaker economic prospects and tumbling currencies off the back of heightened tensions with the US boosted Chinese and Iranian gold demand, while US investors shrugged off any geopolitical concerns,” he added.

According to the report, the total supply of gold rose 3 percent in Q2 2018 to 1,120t, supported by higher mine production and recycling growth.

The second quarter saw mine production rise 3 percent to 836t, the highest Q2 on record, as projects in Russia, Indonesia and Canada continued to ramp-up.

Gold recycling also grew, as currency weakness in India, Turkey and Iran boosted local gold prices and encouraged consumers to lock in profits from their holdings.