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Home / Business / Physical demand for gold is down 11% in the second quarter, even with ETF purchases

Physical demand for gold is down 11% in the second quarter, even with ETF purchases



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(Kitco News) – According to a recent study by the World Gold Council (WGC), record investment demand remains the dominant theme of gold and highlights the growing duality in the market.

In its gold demand trends for the second quarter, the WGC said demand for investment in gold-guaranteed commodities (ETFs) offset the global decline in demand for physical metals from April to June. The report states that total physical gold consumption fell to 1

,015.7 metric tons, or 11%, compared to the second quarter of 2019. A quarter.

The COVID-19 pandemic again had the greatest impact on the gold market in the second quarter, drastically reducing consumer demand while providing investment support. The global response of central banks and governments to the pandemic, in the form of interest rate cuts and massive liquidity injections, has led to a record 734 tonnes of flows into gold-based ETFs, analysts said in a report.

Looking at data for the second quarter, the WGC said global gold funds received 434 tonnes of precious metal, almost in line with 2009. A quarterly record of 465.7 tons in the first quarter, reported during the global financial crisis. In the first half of the year, the value of gold held by ETFs rose to a record $ 205.8 billion, the WGC added.

“Revenues for the first half of 2009 exceeded “Recorded an annual record of 646 tons and increased global stocks to 3,621 tons,” analysts said.

Analysts said gold in the second quarter is an attractive safe haven for investors seeking to hedge against market uncertainty, unprecedented monetary policy actions and low interest rates. The high growth rate of gold, with prices rising by 17% in the first half of the year, was also a critical factor in attracting new investors.

However, investment demand was almost the only bright spot for total gold consumption in the second quarter.

Looking at other important gold markets, the WGC said demand for physical bands and coins declined 32% in the second quarter compared to 2019. In the second quarter. Overall, demand for bands and coins fell to an 11-year low in the first half of the year. .

The WGC said Thailand in particular was the largest contributor to the annual decline in second-half bar and coin investment. Consumers reportedly sold a mass of gold as the economy was devastated by the COVID-19 pandemic.

“Job losses and lower incomes at a time when gold prices are rising sharply have led to non-investment as Thai investors have used their gold reserves to finance their financial needs,” analysts said.

While demand for coins and bands was weak in important eastern markets, Western nations had an insatiable appetite for physical metal. The WGC said demand for coins and bands in the U.S. rose to 13.8 tonnes in the second quarter, more than quadrupling since 2019.

European investors bought a total of 137.4 tonnes of tapes and coins in the first half of this year, the highest level in a decade, the WGC reported.

Referring to the jewelery market, the WGC said that demand for jewelery fell to 572 tonnes in the first half of the year, up 46% from the first half of 2019. Half a year.

“Lock-in restrictions have closed many markets, and consumers have faced the severe effects of the economic downturn at a time when gold prices have been rising and rising, making access a problem for many,” the WGC said.

Demand for jewelry has fallen sharply in the two largest gold-consuming countries. The WGC said demand for Indian jewelry fell 74% over the year to 44 tonnes. At the same time, demand for jewelry in China fell 33% to 90.90 tons.

U.S. WGC said jewelery demand fell to a record low in the second quarter to 19.1 tonnes

“The store closures due to COVID-19 were an obvious reason for the downturn, which was exacerbated by the fact that the closures covered Easter and Mother’s Day, both of which have traditionally increased significantly in jewelry stores,” analysts said. said.

Central bank gold demand, another important support for the gold market, fell 50% to 114.7 tonnes in the second quarter. While central banks remain net buyers of gold, the pace of these purchases has slowed sharply, the WGC said.

“Purchasing has become more concentrated, so far in 2020. Fewer banks replenished stocks, “analysts said. “We hope that in 2020. Central banks will remain net buyers, but at a lower rate than in the previous two years. “

Finally, the technology sector fell 18% year on year when demand for gold stood at 66.6 tonnes.

While demand for gold fell sharply in the second quarter, supply also declined. The WGC said total gold mine supplies fell 15% in the second quarter to 1,034.4 tonnes.

“The main reason for the decline was the severe blockade of coronavirus in major mining nations across the H1 level,” the WGC said.

Disclaimer: The opinions expressed in this article are those of the same authors and may not reflect the views expressed Kitco Metals Inc. The author made every effort to ensure the accuracy of the information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is for informational purposes only. Any exchange of commodities, securities or other financial instruments is not an invitation. Kitco Metals Inc. and the author of this article do not acknowledge any liability for loss and / or damage arising out of the use of this publication.


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