Recent falls in the gold price have generated significant increases in demand, most notably from consumers in China and India – by far the biggest markets for gold – compared with the same time last year, according to the latest World Gold Council Gold Demand Trends report.
Globally, jewellery demand was up 37 per cent in Q2 2013 to 576 tonnes (t) from 421t in the same quarter last year, reaching its highest level since Q3 2008.
In China, demand was up 54 per cent compared to a year ago, while in India demand increased by 51 per cent. There were also significant increases in demand for gold jewellery in other parts of the world: the Middle East region was up by 33 per cent, and in Turkey demand grew by 38 per cent.
Bar and coin investment grew by 78 per cent globally compared to the same quarter last year, topping 500t in a quarter for the first time. In China, demand for gold bars and coins surged 157 per cent compared with the same quarter last year, while in India it jumped 116 per cent to a record 122t. Taking jewellery demand and bar and coin investment together, global consumer demand totalled 1,083t in the quarter, 53 per cent higher than a year ago.
For the tenth consecutive quarter, central banks were net buyers of gold, purchasing 71t, which reinforces the trend that began in Q1 2011.
Demand in the technology sector was stable once again, totalling 104t, a rise of 1 per cent on last year.
Meanwhile gold held in gold-backed ETFs, which in 2012 accounted for just 6 per cent of the world's gold demand, fell by just over 400t, driven by hedge funds and other speculative investors continuing to exit their positions. This was predominantly in the US.
Overall, demand for gold in Q2 2013 was 856t, down 12 per cent on a year ago.
On the supply side, recycling fell 21 per cent in the quarter while mine production was 4 per cent higher than a year ago, at 732t. In total, supply was 6 per cent lower than a year ago.
Marcus Grubb, managing director, investment at the World Gold Council, says: "The second quarter continued the trend that we saw in the first, of a rebalancing in the market, as gold coming onto the market from ETF sales met with a wave of demand for bars and coins, as well as jewellery. This surge in bar and coin investment was a common theme in key markets around the world, and has been particularly prominent in the world's biggest gold markets, India and China. This shift from West to East has been further reinforced by recent data from the LBMA showing that in June the volume of gold transferred between accounts held by bullion clearers hit a second consecutive 12-year high, buoyed by strong Asian physical demand.
"This quarter again demonstrates the unique diversity of global gold demand, as the self-balancing nature of the market apparent in the previous quarter was even more clearly in evidence. Across the decades, different sectors in the gold market have risen in prominence at different points in the global economic cycle and the current shifts are just part of the normal ebb and flow of what is an extremely liquid market."
The average gold price for the quarter was USD1,415/oz, down 12 per cent on the same period last year. In value terms, gold demand in Q2 2013 was USD39bn, down 23 per cent compared to Q2 2012.