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(Kitco News) – Record investment demand remains the dominant theme for gold and highlights growing duality in the market, according to the latest research from the World Gold Council (WGC).
In its Gold Demand Trends for the second quarter of the year, the WGC said demand for investment in gold-traded products (ETFs) offset by no decline in physical demand for the metal between April and June. The report said that in total, physical consumption of gold fell to 1,015.7 tonnes, down 11% compared to the second quarter of 2019.
“The COVID-19 pandemic was once again the main influence on the gold market in Q2, which greatly reduced consumer demand while supporting investment. The global response to the pandemic by central banks and governments, in the form of rate cuts and massive liquidity injections, has triggered a record 734t flows in gold-rich ETFs, ”said the -analysts in the report.
Looking at second-quarter data, the WGC said global gold ETFs saw an influx of 434 tonnes of precious metal, almost in line with the Q1 2009 quarterly record. of 465.7t reported during the height of the Global Financial Crisis. The value of gold held in ETFs rose to a record $ 205.8 billion in the first half of the year, the WGC added.
“First-half inflows surpassed the annual record of 646t and raised global companies to 3,621 tonnes,” analysts said.
Analysts said gold in the second quarter is an attractive asset of refuge for investors seeking risk speculation against market uncertainty, unprecedented monetary policy action and low interest rates. Gold’s significant momentum as prices rose 17% in the first half of the year was also a critical factor in attracting new investors.
However, demand for Investment was quite the only strong place for total gold consumption in the second quarter.
Looking at other major gold markets, the WGC said physical demand for the bar and coins fell 32% in the second quarter of the year, compared to Q2 2019. In total, the the first half of the year saw bar demand and coins drop to an 11-year low.
The WGC said that in particular, Thailand was the largest contributor to the annual decline in bar and coin investment in the second half. Consumers sold their mass in gold as the economy was ravaged by the COVID-19 pandemic, according to the report.
“Job losses and lower income levels at a time of rapidly rising gold prices have led to an increase in divestment as Thai investors have used their gold holdings to finance financial needs. their analysts, “analysts said.
Although important Eastern markets saw weak coin and bar demand, Western nations had an insatiable appetite for physical metal. The WGC said demand for coins and the bar in the U.S. rose to 13.8 tons in the second quarter of the year, more than quadrupling demand by 2019.
European investors bought a total of 137.4 tonnes of bars and coins in the first half of the year, the highest level in a decade, the WGC said.
On the jewelery market, the WGC said demand for jewelery fell in the first half of the year to 572 tonnes, down 46% compared to the first half of 2019.
“Locking restrictions have closed many markets, and consumers have faced the challenging consequences of an economic downturn at a time when gold prices have been moving from strength to strength, making accessibility an issue for many. , “the WGC said.
The two largest gold-consuming nations have both seen a significant decline in jewelry demand. The WGC said demand for Indian jewelery has seen an annual decline of 74% to 44 tonnes. At the same time, China has seen demand for jewelery drop 33% to 90.90 tonnes.
In the US the WGC said demand for jewelery fell to its lowest level on record in the second quarter to 19.1 tonnes
“Shop closures due to COVID-19 were the clear reason for the decline, which was more severe due to the fact that the lockout included Easter and Mother’s Day, both of which they traditionally see a noticeable increase in the footfall for jewelry stores, ”analysts said.
Central bank gold demand, another important pillar in the gold market, fell 50% in the second quarter to 114.7 tons. Although central banks remain net buyers of gold, the pace of that purchase has slowed significantly, the WGC said.
“Purchasing has become more concentrated, with fewer banks adding to reserves so far in 2020,” analysts said. “We expect central banks to remain net buyers in 2020, but in volumes below those of the previous two years.”
In the end, the technology sector saw an 18% annual decline with gold demand amounting to 66.6 tonnes.
While demand for gold fell sharply in the second quarter, so did supply. The WGC said total gold mine supply fell 15% in the second quarter to 1,034.4 tonnes.
“Stopping coronary angiography in major mining nations during H1 has been the main cause of the decline,” the WGC said.
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