Gold Demand Hit Three-Year High Through First Half of 2019

Gold demand jumped to a three-year high through the first half of 2019, driven by central bank gold-buying, inflows of metal into ETFs and a resurgence of Indian jewelry demand.

Gold demand totaled 2181.7 tons through the first half of the year, according to the World Gold Council Gold Demand Trends Q2 2019 report. It was the strongest gold demand through the first half of a year since 2016.

Global demand for the yellow metal was up 8% year-on-year in the second quarter, coming in at 1,123 tons.

Record-breaking central bank buying was a major driver of Q2 demand. Globally, central banks bought 224.4 tons of gold in Q2. That brings the total on the year to 374.1 tons. China and Russia have been the biggest buyers as they continue efforts to diversify reserves, undermine dollar hegemony and reduce the United States’ ability to weaponize the dollar as a foreign policy tool.

Inflows of gold into ETFs also helped boost Q2 demand. Holdings globally grew by 67.2 tons during the quarter and reached a six-year high of 2,548 tons. According to the World Gold Council, geopolitical instability, the expectation of lower interest rates, and the rallying gold price in June all factored into the increase in ETF gold holdings.

Gold jewelry demand was also up in Q2, driven primarily by buying during the wedding season in India. Globally, demand rose 2% to 531.7 tons. Indian demand spiked by 12% in the quarter. H1 jewelry demand was marginally firmer at 1,061.9 tons – a four-year high.

Coin and bar demand did not follow the trend higher. Investment in physical metal in China was sharply lower and North American demand remained weak. Bar and coin investment in Q2 sank 12% globally to 218.6 tons. A 29% year-on-year drop in China accounted for much of the global Q2 decline.

Gold demand in the technology sector also remained sluggish. The WGC blamed lackluster demand on a slowing global economy and the trade war between the US and China. The total volume of gold used in the technology sector fell 3% year-on-year to 81.1 tons during Q2. It was the third consecutive quarter of falling tech demand. The WGC report said there are signs of recovery and its analysis expect declines to continue to slow throughout H2 2019.

Gold supply was up about 6% in Q2 thanks to strong mine output and robust gold recycling. Q2 saw the highest level of gold recycling since 2016.

The price of gold hit multi-year highs in Q2, surging through the $1,400 level for the first time since 2013. The expectation of central bank interest rate easing was a big driver in prices, along with geopolitical uncertainty. The sharp rise in the US dollar gold price in June was replicated – if not exceeded – by the gold price in other currencies.