Global gold demand touches 3-year high

Continued central bank buying, sustained growth in gold-backed ETFs were the key drivers: WGC

Global gold demand in the first half of 2019 jumped to a three-year high on the back of robust demand by central banks and gold-backed exchange-traded funds (ETFs).

Gold demand was pegged at 2,181.7 tonnes in the first six months of the current calendar year, reflecting an 8% rise compared to the first half of 2018, as per the latest report by the World Gold Council (WGC).

“Continued central bank buying and sustained growth in gold-backed exchange-traded funds [ETFs] were the key drivers of this increase,” the report stated.

“Central banks bought 224.4 tonnes of gold in Q2 2019. This took H1 [first six months] buying to 374.1 tonnes, the largest net H1 increase in global gold reserves in our data series. In a continuation of recent trends, buying was spread across a diverse range of – largely emerging market – countries,” it added.

Meanwhile, holdings of gold-backed ETFs grew 67.2 tonnes in the second quarter to a six-year high of 2,548 tonnes. As per the global body, continued geopolitical instability, dovish commentary on monetary policy from central banks and the rallying gold price in June were the main factors driving inflows into the sector.

Incidentally, a strong recovery in India’s jewellery market pushed the overall jewellery demand in the second quarter by 12% to 168.8 tonnes. A busy wedding season and healthy festival sales boosted demand, before the June price rise brought it to a virtual standstill, the report stated.

Bar and coin

Bar and coin investment in the second quarter dipped 12% to 218.6 tonnes and combined with the soft first quarter number, took the first half total to a six-year low of 476.9 tonnes. A 29% year-on-year drop in China accounted for much of the global second quarter decline, according to WGC.

On the other hand, gold supply grew 6% in the second quarter to 1,186.7 tonnes. A record Q2 gold mine production and a 9% jump in recycling, boosted by the sharp June gold price rally, led the growth in supply. On an overall half yearly basis, the supply touched 2,323.9 tonnes, the highest level since 2016.

In terms of price, the yellow metal touched multi-year highs, breaching $1,400/oz for the first time since 2013.

Among the factors driving this rally were expectations of lower interest rates, political uncertainty with further support coming from strong central bank buying, the report said.

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