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Gold demand slumps 14% in H1 – WGC

Gold demand slumps 14% in H1 – WGC

Photo by Bloomberg

3rd August 2017

By: Natasha Odendaal

Creamer Media Senior Deputy Editor

     

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JOHANNESBURG (miningweekly.com) – Global gold demand experienced an expected slowdown in the first half of this year after a rollercoaster 2016 which saw a record level surge in demand from exchange-traded funds (ETFs).

The World Gold Council’s (WGC’s) latest 'Gold Demand Trends' report showed a 14% contraction in demand in the first half of this year to 2 004 t, attributed almost exclusively to the lower ETF inflows, leaving in its wake a somewhat “different” set of demand drivers as the market normalises.

The first quarter of the year under review registered an 18% decline in gold demand to 1 034.5 t, with the second quarter following suite with a further 10% decline to 953.4 t, WCG member and market relations head John Mulligan told Mining Weekly Online on Wednesday.

Despite the downward trend, the shifts in demand suggested a degree of normalisation in some markets and a recovery in others, after the record ETF inflows dominated demand last year, while consumer demand had slumped.

The first half of this year had been marked by steady ETF inflows in Europe and the US; a recovery in jewellery demand, with good growth in India; and an increase in retail investment and technology demand.

ETF inflows slowed dramatically from last year’s record pace, with total inflows at 168 t for the first half of this year.

European ETFs saw the strongest inflows, with holdings in these funds reaching an all-time high of 978 t.

Net central bank purchases of 177 t in the first half of the year were also 3% lower than in the same period in 2016.

Interestingly, Turkey bought 21 t of gold in the second quarter in its first significant addition to its reserves since the 1980s.

The WGC report showed bar and coin investment rebounding 11% from “very low levels” last year to 532 t during the first six months of this year.

Jewellery demand remained weak in the first half of the year, growing 5% to 967.4 t but remaining below the 1 000 t mark for only the fourth time in the data series.

India, swinging to a strong recovery with 41% growth, drove the overall second-quarter demand up 8% to 481 t. However, this remained well below the five-year long-term quarterly average of 586 t.

Technology demand registered its third consecutive quarter of growth, up 2% to 81.3 t during the second quarter of the year.

Meanwhile, on the supply side, mining production remained mostly flat at 1 557 t during the first six months of the year.

The first half of 2017 represents a continued “normalisation” of recycling in most markets, culminating in a rapid 18% drop in the second quarter of the year to 280 t.

Dehedging in the first half of the year totalled 22.5 t, a rapid reversal of the 72.5 t of hedging reported in the first half of 2016.

WGC noted that the global hedgebook stood at 228 t, 22% lower than the corresponding period last year.

Edited by Creamer Media Reporter

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