Gold Demand Slows Down in Second Quarter

Global gold demand declined sharply in the second quarter as prices steadied following exceptional circumstances in the same period of last year, according to the latest World Gold Council (WGC) report.
Bullion demand stood at 964 tons in the second quarter, down 16 percent on year, when demand totaled 1,148.3 tons, the report published Thursday found.

However, the decline came as no surprise given the contrast in market conditions between the periods.

“The rapid 25 percent drop in the gold price during the April-June period of 2013 sparked a leap in gold demand that we have heard described as a ‘once in a generation’ event,” the report said.

The 2Q13 price decline was driven by outflows from exchange traded funds as investors saw the onset of tapering by the Federal Reserve dampening inflation expectations.

By contrast, gold prices held within a relatively narrow sideways range in 2Q14, keeping volatility well below average.

Much of the slump was attributed to large declines in jewelry, bar and coin investment. Jewelry demand – which historically accounted for over half of global gold demand – fell by almost a third in 2Q14, while bar and coin investment fell to less than half the levels seen in 2Q13.

Much of jewelry’s decline occurred in Asia and the Middle East, although most western markets – with the exception of Italy – saw year-on-year gains, particularly the U.S. and the U.K.

The WGC blamed China and India for the slump in bar and coin investment. Indian investors have had their hands tied by a ban on coin imports, uncertainty around the election of a new prime minister and restrictions imposed on the movement of cash and hard assets. Chinese investment demand was suppressed by a lack of price direction and the hangover from last year’s buying frenzy. Base effects exacerbated the decline in China given record-high demand in in 2Q13.

via CNBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza