Facts ‘n’ figures: Asia drags down gold demand in Q2

The following is an edited summary of the World Gold Council’s Gold Demand Trends report for this year’s second quarter. For the full report, please visit www.gold.org

The latest Gold Demand Trends report for Q2 2015 from the World Gold Council shows total demand was 915 tonnes, a fall of 12% compared to the same period last year, due mainly to a decline in demand from consumers in India and China. However, demand in Europe and the U.S. grew, driven by increasingly confident jewellery buyers and strong demand for bars and coins. Looking ahead, there are encouraging signs moving into what are traditionally the busiest quarters for gold buying in India and China.

Overall jewellery demand was down 14% to 513 tonnes, from 595 tonnes in 2014 due to falls in consumer spending in Asia. In China, slowing economic growth and a rallying stock market led to a 5% fall in demand to 174 tonnes. In India, the heavy unseasonal rains in Q1 and drought in Q2 impacted rural incomes and affected gold demand. Auspicious days for marriages in Q3 also meant that wedding-related demand was unusually slow, leading to lower jewellery demand of 23% to 118 tonnes. If we look at the picture for the first half of this year in India, jewellery was down 3% to 268.8 tonnes from 276.1 tonnes in first-half 2014. The U.S. remained steady, with jewellery demand up for the sixth consecutive quarter by 2% (26 tonnes). In Europe demand was also up, with Germany up 7%, and the U.K. and Spain both growing by 6%.

Global investment demand was down 11% to 179 tonnes from 200 tonnes in Q2 2014. India drove the fall, down 30% to 37 tonnes, due to uncertain price expectations and a buoyant stock market. This was countered by a rise in Chinese bar and coin demand, up 6% to 42 tonnes. In Europe, fears of a potential Greek exit from the eurozone saw retail investment in gold reach 47 tonnes — 19% higher compared to last year. The U.S. also saw strong demand, with retail investment increasing by 7%. Of note was the huge burst of activity in June, when bullion coin sales by the U.S. Mint hit a 17-month high.

Elsewhere, central banks were strong gold buyers. Net official sector purchases totalled 137 tonnes, with Russia and Kazakhstan the biggest buyers. Despite a 13% year-on-year fall, buying increased by 11% when compared with the first quarter of this year. It is the eighteenth consecutive quarter where central banks were net gold buyers.

Total supply was down 5% to 1,033 tonnes, with mine production’s rise of 3% to 787 tonnes in Q2 2015 offset by declining recycling levels — down 8% to 251 tonnes. Mine production could slow in the second half, as the gold mining industry manages costs and optimizes operations in the face of challenging markets.