Demand For Gold Bars/Coins Make Up For ETF Outflows In Q2 2013

The World Gold Council released the global gold demand trends for the second quarter of this year. In this article, we highlight the most important figures. In fact, the accompanying charts tell the story.

During the second quarter, gold demand accounte for 856.3 tonnes. That’s 12% less than the same quarter a year ago. A wave of outflows from ETFs was the principal cause of the decline, although this was mitigated by record demand for gold bars and coins. Continuing the theme of the previous quarter, demand for jewellery grew significantly to reach multi-year highs. Supply declined by 6%, the primary reason being a marked contraction in recycling.

The 12% decline in tonnage demand translated into a 23% drop in value to US$39bn – its lowest level for more than three years (see table). Q2 saw an absolute drop in the gold price of more than US$400/oz – a double-digit decline in the average quarterly price compared with both Q1 2013 and Q2 2012. In the context of this price move, the decline in value terms is unsurprising. That total bar and coin demand was able to reach a record value of US$23.1bn in spite of such a sizeable price move is testament to the strength of demand in that sector. The price action also had an impact on the supply side of the gold market resulting in a sharp contraction in recycling. In what is a normal reaction to sharply weaker prices, recycling activity shrank – primarily due to consumers in developing markets holding onto their stocks of old gold as the profit motive waned along with the gold price.

gold_demand_Q2_overview

The second quarter saw:

  1. a continuation of the strong recovery in consumer demand for jewellery;
  2. the prominent role of India and China on the global stage;
  3. a divergence between different elements of investment; and
  4. a shift in focus from West to East – all of which were amplified compared to last quarter.

The following three charts show the details for the investment demand per category, total bar and coin demand over the last years, and central bank demand in the last quarters.

gold_demand_Q2_2013_investment_demand

 

gold_demand_Q2_bars_coins

 

gold_demand_Q2_central_banks

 Source: World Gold Council and Thomson Reuters.

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