Gold demand leaps to three-year high as prices surge: WGC

Gold demand leaps to three-year high as prices surge: WGC”

Central banks continued to load up on gold in the first half, helping push total bullion demand to a three-year high, according to the World Gold Council.

"Central bank buying and healthy ETF [exchange-traded fund] inflows were the driving forces behind gold demand throughout the first half of 2019", it said. That was the largest acquisition of gold recorded by WGC in its 19-year quarterly data releases.

The holdings of gold-backed ETFs grew 67.2 tonnes in April-June period to a six-year high of 2,548 tonnes.

Combined with the first quarter of the year, gold demand increased to 2181.7 tonnes in the first six months of 2019, an uplift of eight per cent compared with the first half of last year. Gold price has increased by nearly 12 per cent since the beginning of this year. They are being driven by the softened stance of central banks, including a European Central Bank decision to cease limiting sales of the precious metal, amid geopolitical uncertainty and rising prices. "However, the price rise in June and an unfounded expectation of a import duty cut in the fiscal budget, brought demand to a virtual standstill when the quarter ended", Somasundaram said. Volume of recycled gold is likely to increase from 87.1 tonnes in 2018 to 100 tonnes in 2019.

Jewellery demand during the quarter under review jumped 12 per cent at 169 tonne (150 tonne) while in value terms it was up 17 per cent at Rs 49,380 crore (Rs 42,200 crore).

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"We also saw an uptick in sales at an individual level as investors took advantage of June's price rally to lock-in profits; jewellery recycling and retail bar and coin liquidations both rose", he said.

While jewelry purchases rose 2% in the second quarter, demand slowed in June in India and China, the top buyers, Hewitt said.

Overall, the second quarter was "a strong quarter" for India, not only in terms of jewellery but also for investment demand, which similarly, was up by 13%. Overall, gold demand in India in the first half of the year was 372.2 tonnes, 9 per cent higher than H1 2018 despite a slowing economic environment and restrictions on the movement of cash during the election season. We believe that there will be destocking but the demand will not be affected.

South African production fell by 12% year-on-year during the quarter as a result of the industrial action, which began in November 2018 and only drew to a close at the end of April.

The US President said he would impose an additional 10% tariff on $300 billion worth of Chinese imports starting September 1, renewing trade tensions between the two countries, sending bond yields lower and also increasing the appeal of safe-haven assets like gold.

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