Gold Demand Up 12% Through First Half of ’22 Despite Tepid Second Quarter

Gold demand through the first half of 2022 came in at 2,189 tons, up 12% over the first half of last year, according to the World Gold Council Gold Demand Trends Q2 report.

The healthy rise in H1 demand came despite a tepid second quarter. On a quarterly basis, gold demand totaled 948 tons, 8% lower compared to Q2 2021.

The LBMA gold price averaged $1,871 per ounce in Q2. That was 3% above the second quarter average last year. But as the WGC pointed out, this conceals the 6% decline in the gold price through the quarter due to the pressure of rising interest rates, a strong dollar, and the misguided notion that the Fed can successfully fight inflation with further rate hikes.

With the falling gold price, gold ETFs globally shed 39 tons of gold last quarter. But thanks to a strong Q1, ETF net inflows of gold into ETFs still totaled 234 tons through the first half of the year. That compares with a 127-ton outflow in H1 2021.

Gold bar and gold coin investment totaled 245 tons in Q2. This was equal to the Q2 2021 total. Weaker demand in China was offset by growth in India, the Middle East and Turkey. But physical gold investment was down 12% year-on-year in H1, primarily driven by extremely weak Chinese demand. COVID-induced lockdowns triggered the worst Q2 for Chinese retail gold investment since 2010. The percentage decline is also due to the fact that H1 2021 charted the strongest gold and bar demand since 2013.

Gold jewelry demand hit 453 tons in Q2. That was up 4% over a relatively weak second quarter of 2021. Total H1 jewelry demand of 928 tons fell 2% below the total through the first half of 2021. Overall, gold jewelry demand remains soft compared to prepandemic levels. Several factors played into constraining demand in Q2, including China’s lockdowns and surging global inflation. But support came from healthy wedding and festival buying in India. Rising oil prices also boosted sentiment in the Middle East.

Official central bank gold reserves expanded by 180 tons in the second quarter. Through the first half of this year, central banks have added 270 tons of gold. Q2 net buying was double that of Q1. This growth was propelled by a significant purchase from the Central Bank of Iraq and more modest purchases from a number of regular buyers.

Demand for gold in technology fell 2% year-on-year in Q2 to 78 tons. At 159 tons, H1 technology demand fell marginally below the first half of 2021, primarily due to the slowdown in Q2. COVID lockdowns in China disrupted chip supply chains, leading to a major slump in output during Q2.

You can download the full World Gold Council Report HERE.