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(Kitco News) – The insatiable appetite of central banks for gold dominated the market between April and June, according to the latest data from the World Gold Council (WGC).
In its report on gold demand trends in the second quarter, the council said central banks had bought a total of 224 tonnes of gold between April and June. Official gold reserves increased by 374.1 tonnes in the first half of the year – "the largest net increase in gold reserves in the first half of our 19-year quarterly series", badysts said. The report.
"Purchases were again spread across various countries – mostly emerging markets," said the WGC.
The WGC said nine central banks had bought gold in the first half of the year.
"Central banks, like other investors, have sought gold security because they were looking to protect themselves against the many imminent risks," badysts said.
The report indicates that global gold demand totaled 1,123 tonnes in the second quarter, up 8% from the second quarter of 2018. In the first half, physical gold demand increased by 2,181.7 tonnes, highest level in three years.
The report has highlighted the renewed strength in key sectors of the gold market. In particular, the demand for gold jewelery in India increased by 12% to 168.8 tons compared to the second quarter of 2018. This is the best quarterly increase compared to the second quarter of 2017 .
"Indian demand was boosted at the beginning of the quarter by the wedding season and shopping at festivals, before slowing sharply when the price of gold rose in June," the report said.
The WGC noted that India's demand for gold faced strong headwinds, with purchases virtually "stuck".
"The slowing of the economic environment and restrictions on cash flow during the elections have dampened demand in April and May," the report says.
The Indian gold market was also hit by higher tariffs in early July, with import duties increasing from 10% to 12.5%.
"Even though we do not expect this to have a long-term impact on gold demand in India, we think this will have a moderating impact on the third quarter, especially as prices for gold will fall. Gold remained high, "said the WGC.
While India experienced strong growth in the second quarter, the world's largest consumer of gold saw its third consecutive quarterly decline. The WGC said China's jewelry demand fell 4 percent in the second quarter to 137.8 tons.
"Demand has stopped once the price hike started in June and retailers' promotional efforts could no longer tempt consumers. The showrooms would have been deserted by the end of the quarter, "the badysts said.
Investment demand in ETFs remains robust
According to the report, the second quarter started on a dark note for gold investors, but ended on a positive note. Renewed interest in gold-backed exchange-traded products drove investment growth, rising by 67.2 tonnes in the second quarter, up 99% from the second quarter. quarter of 2018.
The gains were mostly in June, with 126.7 tonnes, up from 57.2 in April. The WGC said total holdings reached their highest level in six years, with 2,548 tons in the first half.
"Geopolitical uncertainties, accommodative monetary policy comments from central banks and rising gold prices were among the main factors that pushed investors to increase their holdings," badysts said.
The WGC has highlighted the growing trend of European and British investors to pave the way for the gold market. He noted that funds listed in the UK accounted for 75% of all cash inflows in the second quarter.
"Investors have sought the gold refuge amidst the uncertainties surrounding Brexit and the leadership battle that followed the resignation of Theresa May as prime minister," badysts said. "The sharp decline in the value of the British pound also fueled fund inflows during the quarter as growth prospects in the UK were cut as a result of repeated failures in the Brexit negotiations. "
The WGC added that historically negative German bond yields have also boosted the attractiveness of gold for investment.
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Although investors embarked on gold-backed ETFs, interest in physical gold has been relatively moderate. The WGC said the demand for gold bullion and coins dropped 12% in the second quarter to 476.9 tonnes, its lowest level since 2009. They noted that the sharp rise in prices in June weighed on the physical demand.
"This market has been struggling for some time, with many traditional gold investors focusing on healthy economic growth, low unemployment and continued wage growth in America," said the WGC. "The rise in the price of gold in June triggered sales by some investors and the aftermarket coin prices have fallen to their lowest level since before the global financial crisis, boosting exports of gold. gold from the United States to Germany. "
Technical sector Sees a lower gold demand
While this is not an important factor for the physical gold market, badysts said the tech sector had seen gold demand fall by 3% in the second quarter, reaching 81.1 tonnes .
"This was the third consecutive quarter of declining demand, due to a whole series of challenges in the electronics sector, including the ongoing trade dispute between China and the United States. However, there are signs of recovery and we expect declines to continue to slow throughout the second half of 2019, "said the WGC.
The supply of gold is increasing due to record production
The Council noted that strong demand for gold is being met by strong production; Analysts said the gold supply had risen 6% in the second quarter to reach 1,186.7 tons. The offer was led by record gold production between April and June.
The WGC added that gold production had increased by 2% to 882.6 tonnes in the second quarter. "This is a record level of world production for the second quarter and follows a first-quarter record of 847.5 t.
Global gold production was praised by Canada, Russia and the United States, who saw their domestic production increase by 9% in the third quarter. Australia, which announced record gold production in 2018, recorded a 6% increase in the second quarter.
The WGC also noted an increase in recycled gold as consumers sold at higher prices near the end of the quarter.
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