World Gold Council Publishes Quarterly Report on Gold Demand

on Aug 17, 2012

In August, World Gold Council released their quarterly publication *Gold Demand Trends* featuring an in-depth look at gold demand by sector and geography, overview of the factors that drive gold prices and a focus report on *Russia’s Gold Evolution*.

Based on the report, the price of the precious metal averaged $1609.49/oz over the second quarter, supply of gold declined 6 per cent compared with the same period last year and demand went down 7 per cent.
The international gold price spent most of the quarter sliding up and down but locked within a $100 range around $1600/oz. Without a clear trend to lean on, gold buyers had mixed responses, especially when it came to investments. Some preferred to increase gold assets as part of their portfolio while others used the chance to liquidate and realise profits before a more defined trend manifests itself. The report argues that the two contradicting investment behaviourL patterns meant the net impact on demand for ETFs and other products was practically zero. Even though investment demand was weaker compared to first quarter, it remained in the higher range, an established trend since the third quarter of 2008. The numbers strengthen the precious metal’s position as a reliable source of liquidity and its usefulness for capital preservation purposes.

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!m[](/uploads/story/265/thumbs/pic1_inline.png)In the second quarter, global consumer demand was unsurprisingly dominated by China and India, accounting for 45 per cent of total bar, coin and jewellery demand. According to the report, global numbers are heavily reflected in changes in the two BRIC countries, and do not necessarily mirror trends in other smaller markets. As a result of the rupee’s depreciation against the dollar, Indian consumers decreased their demand, especially after the price went above the psychological threshold of Rs30,000 (£343.13) /10g. Economic slowdown and the lack of a clear trend in gold prices were the two main factors that kept the downward direction of gold demand in China.

Because of the ongoing Eurozone crisis, European investors once again saw gold as one of the most secure diversifiers and a good preserver of capital. Demand across the region totalled 77.6 tonnes, with a value of demand at €3.1bn (£2.44bn), which was 37 per cent above levels of the previous year.
Leaving aside India’s decreased demand in jewellery, the year-on-year decline is considerably more moderate – 4 per cent compared to 15 per cent otherwise. While the western and Middle Eastern markets were generally weak, countries like Russia, Egypt, and Turkey went against the global trend and generated growth in demand. Overall the global market experienced weaker consumer sentiment and is turned off by rising average prices.

Official sector institutions and central banks increased their demand for gold during the second quarter. Reserves for the first half went up by 254.2 tonnes, 50 tonnes more compared to the first half of 2011. Developing nations’ central banks continue to buy up gold with the purpose of reserve diversification.
In the piece focused on Russia, *Gold Demand Trends* points out that the country has one of the more resilient jewellery markets over the last quarter. Russia’s economic growth fuelled by oil revenues and a strengthened middle class have been the main factors influencing the long term growth in jewellery demand. The country was the fourth largest jewellery consumer and producer of gold in 2011. Its central bank is the eight largest holder of gold reserves and has managed to more than double its holdings over the last five years. The report suggests Russia will continue to grow in its influence on the gold market and reassure its place as one of the biggest consumers on the global scene.


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