Gold had a mostly positive and buoyant six months to June – both on the demand and supply side where a 6% rise in supply was easily absorbed by the market as prices hit multi-year highs, especially in June – which has continued into the current December half-year.
Strong demand from central banks has again helped the gold price continue its long surge, according to the June quarter and half-year report from the World Gold Council (WGC).
The solid rise in central bank activity was the third six month period in a row that demand from these buyers has driven the overall market and supported prices in their long surge.
On top of the central bank buying and healthy inflows into Exchange Traded Funds (ETFs) there were other positive factors at work, according to the WGC.
These were growth in demand for jewellery demand thanks to a more positive environment for Indian consumers. However, that has ended with the June price surge in gold.
Negatives were: Demand for in bar and coin investment were driven by price so as the gold price surged to its highest level since 2013, profit-taking kicked in and retail investment all but dried up.
In fact, a sharp fall in Chinese demand for gold coin and investment was behind total demand from this sector hitting a 10-year low in the June quarter.
And the slowing global economy, especially in China, Japan, and South Korea (thanks in part to Donald Trump’s trade wars) saw the technology sector cut its usage of gold.
Finally, there was a reasonably solid rise in both mine production and recycling fed into a 2% increase in total gold supply for the six months to June.
The WGC said central banks bought 224.4 tonnes of gold in the June quarter, pushing first half purchases to a record high of 374.1 tonnes. The WGC said that was “the largest net H1 increase in global gold reserves in our 19-year quarterly data series.”
Buying was again spread across a diverse range of – largely emerging market – countries.
Holdings of gold-backed ETFs rose by 67.2 tonnes in the June quarter to a six-year high of 2,548 tonnes. “The main factors driving inflows into the sector were continued geopolitical instability, the expectation of lower interest rates, and the rallying gold price in June,” the WGC said.
India saw a strong recovery in interest from the jewellery market which pushed demand in the June quarter up 12% to 168.8 tonnes. “A busy wedding season and healthy festival sales boosted demand, before the June price rise brought it to a virtual standstill.,” the WGC commented. The jump in Indian demand drove global jewellery demand 2% higher year on year (y-o-y) to 531.7 tonnes in the six months to June.
Bar and coin investment in the three months to June sank 12% to 218.6 tonnes as the global price rose and rose to levels not seen since 2013.
The WGC said that combined with the soft March quarter number, the total to the June half fell to a 10-year low of 476.9 tonnes. There was a 29% y-o-y slump in China which the WGC accounted for much of the global June quarter decline.
Gold supply was up a solid 6% in the three months to June 30 to 1,186.7 tonnes.
That was made up of a record 882.6 tonnes of production in the quarter and a 9% jump in recycling to 314.6 tonnes – boosted by the sharp June gold price rally.
Together with supply in the first half of 2019 rose to 2,323.9 tonnes – the highest since 2016.
Gold prices shot to multi-year highs. The gold price broke through $US1,400 ounce for the first time since 2013.
Among the factors driving this rally were expectations of lower interest rates (the Fed decision this week could change gold momentum) and political uncertainty, with further support coming from strong central bank buying.
