Global demand for gold declined in the second quarter and the first half of this year overall, but demand for gold as an investment rose to a record as holdings of exchange-traded funds reached a record high in late June, according to a report by the World Gold Council released on Thursday.
Total global demand for gold, which includes the metal for use in investments, jewelry, technology, and central bank purchases, fell 11% yoy in the second quarter to 1,015.7 metric tons, pulling demand for the first half of the year. year down 6% to 2,076 metric tons.
The COVID-19 pandemic was the main influence on the gold market in the second quarter, “severely reducing consumer demand, while providing investment support,” the report said.
In the first six months of this year, total investment demand for gold, which includes gold-backed ETFs and bars and coins, reached a record high of 1,130.7 metric tons, with a record value of $ 60 billion.
“The global response to the pandemic by central banks and governments, in the form of rate cuts and massive injections of liquidity,” propelled record flows of 734 metric tons in gold-backed ETFs during the first half of the year to a new record 3,621 metric tons, according to the report. The influx helped drive gold prices up 17% in US dollar terms for the period.
However, in contrast, investment in bars and currencies in the first six months of the year fell to the lowest level in 11 years, 17% yoy to 396.7 metric tons. “Many countries remained under closure restrictions in the second quarter,” said the World Gold Council. “This affected demand for bars and coins, even as the price of gold rebounded, reaching eight-year highs in US dollar terms. and breaking new records in many other currencies. ”
Gold futures on Wednesday settled at $ 1,953.40 an ounce, the best result for a more active contract on record.
The report noted a divergence in investor behavior between East and West, with a “profit-taking motive” that dominates sentiment in the East, particularly in Asia and the Middle East, but “safe buying and momentum inversion “take center stage. in western markets, such as Europe and North America, where the demand for bars and coins experienced “substantial growth”.
However, jewelry demand in the second quarter fell 53% yoy to a record quarterly low of 251 metric tons, dropping first half demand by 46% to 572 metric tons. China’s jewelry demand in the first half fell 52% yoy to 152.2 metric tons, and the World Gold Council cited “COVID-19’s lasting impact on consumers’ wallets.”
“Consumers around the world felt the impact of the market crash and the resulting economic slowdown,” the report said. China, which was the first market to exit the blockade, was the only one to see a recovery from “extreme weakness in the first quarter.”
Also for the first half of 2020, gold used in technology fell 13% to 139.9 metric tons. Meanwhile, net purchases by central banks totaled 233 metric tons, down 39% year-over-year over the six-month period.
Meanwhile, the world’s total gold supply fell 6% in the first half of this year to 2,192 metric tons, due to “strict coronavirus blockades in major mining nations,” the World Gold Council said.
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