Global Q2 Gold Demand Slips 16% to 964 Tonnes: WGC

MUMBAI: Global gold demand in the second quarter of this year declined by 16 per cent to 964 tonnes as consumers and investors held back due to an uncertainty about the direction and momentum in prices of the metal, a WGC report has said.

The overall gold demand during the second quarter of 2013 stood at 1,148 tonnes, the World Gold Council Q2 Demand Trends report said.

In value terms, gold demand in Q2 2014 declined by 24 per cent to USD 40 billion compared to Q2 2013.

"Looking at an exceptional year last year where we saw record consumer buying and investor sell-offs, this quarter's demand continues to demonstrate a return to long-term trends, illustrating the uniquely balanced nature of the gold market.

"Jewellery consumers continued to digest the exceptional purchases of 2013, and investors also rebalanced, pulling back from the extremes we saw last year," WGC Managing Director of Investment Strategy Marcus Grubb said.

Overall, the market is stabilising following the extraordinary conditions seen in 2013, he said.

The Central bank purchases rose 28 per cent year-on-year to 118 tonnes from 92 tonnes in the corresponding quarter last year.

The report said it was the 14th consecutive quarter in which Central banks were net purchasers of gold, driven by factors like continued diversification away from the US dollar and the ongoing geopolitical tensions in Iraq and Ukraine.

Total bar and coins demand fell by 56 per cent during the second quarter to 275 tonnes from 628 tonnes in the same quarter of the last year.

In Q2 2014, many investors were uncertain about the direction and momentum of the gold price, while traders in price sensitive markets were far less active due to low volatility, it said.

However, the quarter did see an improvement in investor sentiment towards Electronically Traded funds (ETFs) compared to the last year.

Global jewellery demand, which represents more than half of the total global demand, was down 30 per cent during the quarter under review at 510 tonnes compared to 727 tonnes in the same period last year, the WGC Q2 Demand Trends report said.

India and China remained significant drivers of the global jewellery market, purchasing 154 tonnes and 143 tonnes, respectively.

In Q2, traditionally a quieter quarter for jewellery, consumers continued to digest opportunistic purchases made in 2013 and adopted a need-based approach to jewellery buying.

It further said that Indian jewellery buying was also affected by high value purchases being restricted in the run up to the election and the continued impact of import restrictions on gold.

Going forward, the WGC estimated the annual demand for India to be in the range of 850-950 tonnes and for China at 950-1,050 tonnes this year.

Meanwhile, there were continued signs of recovery in some western markets as jewellery demand in the US rose by 15 per cent to 26 tonnes and in the UK rose by 21 per cent to 4 tonnes as consumer confidence continued to grow in line with the economy and gold came back into fashion, it pointed out.

Total supply for the quarter was up 10 per cent at 1,078 tonnes during the quarter as compared to 979.7 tonnes in the same period of 2013, due to the growth in mine supply.

The WGC report said the supply is expected to peak in 2014 and plateau over the next 4-6 quarters.

Recycling in Q2 2014 was up by one per cent to 263 tonnes as against 261 tonnes in the corresponding quarter last year.

However, in the first half of the year, recycling was the lowest since 2007, the report said.