The gold market remained soft in the three months to June with global demand again falling in the first six month of the year to its lowest level for nine years, according to the World Gold Council (WGC).
Global demand in the quarter fell 4% to 964.3 tonnes from the second quarter of 2017.
That saw demand for the first six months of 2018 tumble to a nine year low of 1,959.9 tonnes, the lowest since H1 2009 thanks to a plunge in demand from Exchange Traded Funds (ETFs).
That helps explain the near 5.4% fall in global gold prices over the quarter.
Gold prices are down 7.6% so far in 2018, thanks to the weakness in the June quarter.
That was despite a continued rise in demand from technology related consumers for the seventh quarter in a row. Jewellery demand from India also fell, adding to the pressure on consumption (and global prices).
The WGC said the fall in demand was mainly down to the sharp, 46% in purchases by ETFs in the June quarter. That saw total purchases for investments drop 9% quarter on quarter.
Central bank purchases dropped 7% over April-June from a year earlier and the weak Indian market saw demand for jewellery, the biggest source of demand, fall 2%.
“It’s been a soft start to the year and that’s largely because of lower investment demand,” said Alistair Hewitt, the WGC’s head of market intelligence.
ETF investment was weakest in the US, where the strong economy gave little incentive to buy gold, traditionally used as a safe place to store assets during political and economic uncertainty.
That’s despite the growing uncertainties surrounding the trade and economic policies of Donald Trump with China and to a lesser the EU.
In Europe, gold demand was bolstered by the rise of eurosceptic parties in Italian elections and uncertainty over European Central Bank policy.
In China an escalating trade dispute with Washington and falling stock markets drove investment demand.
”Towards the end of the second quarter we actually saw outflows from U.S. listed funds,” Hewitt said. “It really was the European inflows that meant we saw modest global inflows over the quarter.”
In Iran, meanwhile, sales of gold bars and coin surged 202% as the Trump pulled the US out of a deal on the country’s nuclear program.
Jewellery consumption in India fell 8% in the second quarter to 147.9 tonnes, in part because of the weaker rupee.
However demand in China was more resilient and rose 5% to 144.9 tonnes.
Q2 2018 saw the seventh consecutive quarter of year-on-year growth in the technology sector, with demand up 2% to 83 tonnes. Gold used in electronics continued to thrive, due to enduring demand for smartphones, games consoles and vehicles. H1 demand reached a three-year high of 165 tonnes.
Global bar and coin investment was virtually unchanged at 248 tonnes. That stronger demand in China and Iran were offset by falls in Turkey, India and Europe, where local prices remained elevated.
Central banks added 89 tonnes of gold to global official reserves in Q2 2018, down 7% compared with Q2 2017. Cumulative H1 2018 purchases of 193 tonnes were the highest since 2015.
Alongside the usual suspects of Russia, Turkey and Kazakhstan, the Reserve Bank of India returned to the market, albeit with only a very small purchase (2.5tonnes, according to the WGC).
On the other side of the market, increased mine production and recycling helped boost supply by 3% to 1,120.2 tonnes in the second quarter.
Recycling was up 4% to 295 tonnes, compared with 283 tonnes in the same quarter of 2017.