Global gold demand hits record in Q2 as investors drive up price

Despite a sharp decline in jewelry demand and record mine production, global gold demand and prices reached record highs in the second quarter, the World Gold Council said in its latest survey on demand trends for the precious metal.

Global demand for the precious metal rose by 4 percent year-on-year, reaching its highest level since records began. The London Bullion Market Association’s gold price jumped 18 percent year-on-year to a quarterly average of $2,338 per ounce, the industry group said.

Gold mining companies took advantage of the record gold price by increasing their production by three percent compared to the previous year, the council said.

“Mine production is still expected to exceed its previous peak as production in several regions, notably Africa, benefits from production increases and expansions as well as higher grades,” the council said.

Also read: Report: BHP considers divestment of Oz Minerals’ Brazilian assets

The high price deterred jewelry buyers, and jewelry consumption fell 19% year-on-year in the second quarter to 391 tonnes, the lowest level in four years.

“Price sensitivity impacted jewelry demand in the second quarter and it may take some time for consumers to fully adjust to higher prices,” the industry group said.

Despite the decline in jewelry demand, a 53% increase in over-the-counter and other investments pushed overall demand higher. Over-the-counter transactions are a network of participants who trade directly with each other without the supervision of a formal exchange.

“Estimating and allocating these investment purchases is difficult due to their lack of transparency, but field research strongly supports available data, which puts them at 329 tonnes – the strongest quarter since Q4’20,” the council said. “Demand from this sector is in response to concerns about the US debt burden, geopolitical risks and the attraction of the sharp price increase.”

At the same time, central banks’ oil purchases rose by 6 percent year-on-year to 184 tonnes, representing a slowdown after the record start to the year.

But this is still a very healthy level of purchases, 3% above the five-year average of 179t,” the council said. “Together with net purchases in the first quarter, central bank gold demand totaled 483t in the first half of the year, the highest half-year in our data series.”

The decline was mitigated by purchases of physically backed gold exchange-traded funds (ETFs): their holdings fell by seven tonnes in the second quarter, compared with a decline of 21 tonnes in the same quarter last year.

“The pace of outflows from gold ETFs slowed significantly in the second quarter,” the council said. “A continuation of the positive trend in gold ETFs, together with a further strengthening of futures positioning, is still likely in our view, given a number of catalysts.”

These catalysts are:

• A clearer path to lower interest rates in the United States and Europe

• A large current and projected US budget deficit

• Increased market volatility due to the US elections in the second half of the year

• Global geopolitical risk, partially limiting recycling and boosting retail demand

• Support from the trend of central bank purchases.

Read now: Endeavour Mining faces increased operational and geopolitical risks, analyst says: “Challenging position”

Benzinga Mining is the bridge between mining companies and retail investors. Contact us [email protected] to get started!