Global gold demand hits six-year-low as China, India buy less

According to the industry body’s Gold Demand Trends, demand was down in all sectors, due mainly to a decline in consumption from top buyers India and China.

Positive figures coming out of Europe and the U.S. failed to offset the general drop, caused by directionless prices, the report adds.

Total gold supply was also affected in the three months to June 30. The total was down 5% to 1,033 tonnes, as an increase in mine production of 3% to 787 tonnes in Q2 2015 was offset by declining recycling levels — down 8% to 251t.

“It is fair to say that investment demand for the quarter remained muted given the continuing recovery in the U.S. economy and booming stock markets in India and China during the quarter,” said Alistair Hewitt, head of Market Intelligence at the World Gold Council.

“Conversely, sharp falls in Chinese stock markets have shaken the largely consumer investment base and we are seeing early indications of interest in buying gold again — all illustrating the unique self balancing nature of gold demand and the diverse drivers which underpin it,” Hewitt added.

Chart provided by The World Gold Council.

After rising to over US$1,200 per ounce in June, gold prices have tumbled, facing seven weeks of mostly uninterrupted losses, the longest fall since 1999. After mid-July, the situation got even worse, with bullion falling below $1,090 per tonne as sellers in China appeared to offload the precious metal.

That’s also when China’s announced gold reserves — though exhibiting significant growth — resulted to be much lower than all expectations.

Juan Carlos Artigas, director of investment research at WGC, told MINING.com is worth noting the report released Thursday covers the period from March to June 2015, which means it precedes more recent activity in July and August. When considering the last two months, however, the WGC sees a more encouraging picture emerging on the horizon, Artigas added.

The analyst highlighted that, in reality, demand has been fairly consistent overall when seen as part of a longer term trend. “The apparent weakness in Q2 2015 relates to strength seen in previous years, especially in 2013, when consumer demand grew exponentially (…) This front loaded some of the demand that normally would have been done later,” he concluded.

Key points of the WGC’s report on gold demand and supply for Q2 2015:

Chart provided by The World Gold Council.

* Overall demand was down 12% in Q2 2015 to 915t compared to 1,038t in Q2 2014.

* Total consumer demand – made up of jewellery demand and coin and bar demand – totalled 715t, down 14% compared to Q2 2014.

* Global jewellery demand was 513t, down 14% compared to the same period last year, due to falls in China, down 5% to 174t, as well as India, down 23% to 118t. The US and Europe saw continued growth with the US up 2% to 26t, and Europe up 1% to 15t.

* Total investment demand was down 11% to 179t, compared to 200t in the same quarter the previous year. Demand for bars and coins saw a 15% drop to 201t from 238t the previous year, as the sector was affected by an expected increase in US interest rates and a continued shift towards other asset classes, notably equities. ETFs saw outflows totalling 23t, lower than the outflows of 38t seen in the same quarter last year.

* Central banks continued to be strong buyers of gold, accounting for 137t in Q2 2015, slightly down on the equivalent quarter last year, but up 11% compared to the previous quarter. It was the 18th consecutive quarter where central banks were net purchasers.

* Year-on-year quarterly mine production increased 3% to 787t in Q2 2015, against 763t in Q2 2014. Recycling levels were down 8% year-on-year to 251t compared to 273t in Q2 2014, resulting in total supply falling 5% to 1,033t.

You can read the full report here.