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Q2 Gold Demand Drops 12% as Increased Investment Demand Fails to Keep Pace with ETF Outflows

The World Gold Council’s Gold Demand Trends (GDT) is the leading industry resource for data and opinion on world-wide gold demand.

The second quarter saw a continuation – and amplification – of Q1 trends: a multi-year high in the jewellery sector; China and India cementing their position as leading markets; contrast between different elements of investment demand; and a flow of gold from West to East.

In a turbulent quarter, demand fell by 12% to 856 tonnes. A wave of outflows from ETFs was the principal cause of the
decline, although this was mitigated by record demand for gold bars and coins. Western investors reacted to a seemingly more positive outlook for the US economy and news of an eventual tapering of quantitative easing by selling gold ETFs.

Please note many believe the outflows from gold ETFs should not be viewed entirely as declining demand. Some portion of those outflows are likely to be investors selling paper for real physical gold or actual physical being used to satisfy delivery requirements of the bullion banks, all of whom have serious problems with declining vault inventory.

  • Demand totalled 856.3 tonnes, worth US$39bn and down 12% vs. year ago
  • Jewellery grew 37% as lower prices generated a surge in demand from consumers
  • Total bar and coin demand set a new quarterly record, exceeding 500 tonnes for the first time
  • India and China together accounted for almost 60% of jewellery demand and around 50% of total bar and coin demand.
  • Strong demand from Asian consumers absorbed gold flowing onto the market from sales by Western hedge funds and speculative investors
  • Demand in the Technology sector saw marginal growth, primarily due to a price-related improvement in the electronics sector
  • Central banks were net purchasers of gold for the tenth consecutive quarter, adding 71 tonnes to reserves during Q2
  • Total gold supply contracted 6% to 1,025.5 tonnes, driven by a sharp drop in recycling activity
  • gold demand

    Jewellery: Multi-year high in the jewellery sector as lower prices generated a surge in demand from consumers.

    Investment: Record demand for gold bars and coins was countered by sizeable net outflows from ETFs, resulting in a year-on-year decline in overall investment demand relative to Q2 2012.

    Technology: Technology sector saw marginal growth, the 1% year-on-year increase the first in two years.

    Central Banks: Central banks demand slowed in Q2 2013 from record quarter in year previous, marking tenth consecutive quarter of purchases.

    Supply: Total gold supply shrunk 6% from Q2 2012, almost solely due to the reduction in recycling

    Download full report: Gold Demand Trends Q2 2013 (PDF 1.3 MB)

    Latest statistics on gold’s global supply and demand. View Q2 2013 Gold statistics.

    I believe that precious metals have bottomed, as we are seeing a powerful breakout from oversold lows. Several of the stocks in the Gold Stock Bull portfolio/newsletter have advance by double digits in the past few weeks alone. We have been scaling into new positions over the past few months and will continue to do so in the coming weeks if prices hold above key technical support levels.

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    By | 2017-03-23T14:06:24+00:00 August 15th, 2013|Gold & Silver Commentary|

    About the Author:

    Jason is the founder of goldstockbull.com. He previously worked in data analytics for the world's largest research firm, consulting to Fortune 500 companies globally. Jason eventually leveraged those skills to trade successfully full-time and after helping friends and family optimize their investments, he launched Gold Stock Bull and The GSB Contrarian Report newsletter. Jason is a cycles investor with a contrarian eye for identifying undervalued assets. He has built an expertise in both the precious metals and cryptocurrency markets. Jason believes in honest money, limited government, decentralization of power and enjoys studying alternative economic models.