Global gold demand falls 7.1% on weak India, China jewellery use
Global gold demand fell 7.1 per cent to its lowest level in more than two years in the second quarter on weak demand in India and China, the world’s top two consumers of the yellow metal, the World Gold Council (WGC) said on Thursday.
Overall gold consumption dropped by nearly 76 tonnes to 990 tonnes in the three months to June, its lowest quarterly level since the first three months of 2010, the WGC said in its quarterly Gold Demand Trends report.
Demand for jewellery and investment fell substantially. Jewellery consumption was down 72.3 tonnes at 418.3 tonnes, while investment fell 88.3 tonnes to 302 tonnes.
The WGC’s managing director for investment research, Marcus Grubb, said he still expected demand growth in the full year but that forecast was heavily dependent on gold-friendly policy moves from central banks and a recovery in Indian demand. In the second half, gold demand in India, the world’s top consumer, is likely to fall further by a fifth in the second half of 2012 from a year ago on higher prices and as weak monsoon rains hurt incomes of rural households.
Grubb said the WGC expected Indian demand to fall to 650-750 tonnes this year from 933 tonnes in 2011 and Chinese demand to rise 10 per cent to 850 tonnes.
In the second quarter, investment and jewellery demand from consumers in India fell 38 per cent to 181.3 tonnes. Buying has been hit by a hike in import duties and record-high local prices due to a weak rupee.
In the first half, Chinese demand also fell seven per cent to 144.9 tonnes. A slowdown in economic growth and a lack of clear price direction in gold was behind the drop, the WGC said.
Jewellery and investment purchases in the United States fell 17 per cent to 34.2 tonnes, the same off take that was seen in Germany after a 51 per cent jump in coin and bar investment. European Union demand was a rare bright spot, rising 11 per cent to 86.4 tonnes.
European buying has increased as consumers have sought refuge from the eurozone debt crisis and its impact on the single currency, which is down five per cent against the dollar this year. Grubb said a drop in US demand was due to a stagnating price environment. Spot prices had a lacklustre second quarter after a more buoyant start to the year, trading at an average $1,612 an ounce, their weakest quarter in a year.
“When the price has been in a range for this length of time, nearly 12 months, for investment products in particular, that does take the market off the boil,” he said.
“Investors will hang fire until they can see a clearer picture of how the next price trend is going to develop. That is true in China of investment products, and in America as well.”
Official sector purchases of gold more than doubled, meanwhile, to a record 157.5 tonnes in the last quarter, with Russia, Kazakhstan, Turkey and Ukraine all announcing a rise in bullion reserves in that period.
“If you look to the half-year, central banks have bought 254 tonnes against 200 tonnes for the half-year last year,” Grubb said. “At this rate, we’ll be looking at a record central bank year, higher than last year, which was a record since 1964.”