JOHANNESBURG (miningweekly.com) – Gold demand was on track for a 4 000 t market by year-end, World Gold Council MD Marcus Grubb said on Wednesday.

Grubb, who was speaking to Mining Weekly Online from London, said gold’s major Q2 price fall had sparked massive consumer demand.

Q2 gold uptake for jewellery rose 37% from the same period last year and demand for bars and coins soared to an all-time quarterly record of 507 t.

Some country demand was staggeringly high, again based on the price drop, with consumers the world over coming into the market on the perception of gold at $1 280/oz and $1 300/oz being cheap.

Total demand for China and India was up 78% and 80% compared with Q2 last year and at the half year; Greater China took up 600 t and India 566 t, indicating failure of the Indian government’s constraining measures.

On the supply side, there was a major 21% fall in recycling amounting to 62.4 t less gold coming on to the market, the biggest fall since 2007.

If it were it to continue, there would be a 300 t recycling drop by year-end.

Mine supply, which rose 4% in the quarter, is poised to flatten and then decline as a consequence of planned production cutbacks.

Futures and exchange-traded funds (ETFs) sales triggered gold’s big Q2 price drop with 400 t of ETF gold going East into Chinese, Indian and Middle Eastern hands.

Q2 gold demand, which totalled 856.3 tons, was worth $39-billion, compared with Q1 demand of 963 t, worth $51-billion.

The 12% tonnage decline translated into the 23% value drop, with the $39-billion revenue line being the lowest for more than three years.

Q2 saw an absolute drop in the gold price of more than $400/oz – a double-digit decline in the average quarterly price compared with both Q1 this year and Q2 last year.

A price recovery is likely to be needed by recycling resurges, indicating a lower need for ‘distress selling’ in developed markets, particularly the US.

Recycling has generated, on average, 40% of total supply over the last five years.

Jewellery buying caused a rise in regional premiums on gold, as supply chain bottlenecks caused delays in meeting demand.

The gold price lost out largely as a result of many anticipating a recovery in the US market, where the Federal Reserve continues to back bonds at a significant rate.

With most gold producers focusing on lowering production, and recycling slowing, a gold supply deficit is expected in 2014 and 2015.