Gold demand drops 16% led by declines in India to China - Livemint

China’s jewellery purchases slipped 45% and those in India fell 18%, with the countries together accounting for almost 60% of world jewellery consumption. Photo: Bloomberg

London: Gold demand fell 16% in the second quarter, led by declines in India and China, the World Gold Council said.

Global demand slipped to 963.8 tonnes from 1,148.3 tonnes a year earlier as jewellery purchases fell to the lowest since the fourth quarter of 2012, the London-based council said on Thursday in a report. China fell behind India as the largest consumer, with global jewellery buying dropping 30% and bar and coin demand down 56%. Mining companies hedged 50 tonnes as they continued selling future output.

Gold slid 28% in 2013, the most in three decades, as investors lost faith in the metal amid expectations US policy makers would cut stimulus as the economy strengthens. Last year’s price drop spurred jewellery, coin and bar demand, particularly in China. Indian bullion buying has slowed as the government restricted imports to curb a current account deficit.

“Buyers in China and India were waiting to see a price trend develop,” Marcus Grubb, managing director of investment strategy at the council, said by phone on Wednesday from London. “It’s a market still returning to its fundamentals. It was an exceptional year and quarter last year.”

Gold for immediate delivery traded at $1,312.28 an ounce by 7:17am in London on Thursday for a 9.2% gain this year, according to Bloomberg generic pricing. It averaged $1,290 in the second quarter, down 9% from a year earlier and little changed from the first quarter.

Jewellery demand

Global jewellery demand declined to 509.6 tonnes in the latest quarter, the least since the final three months of 2012. China’s purchases slipped 45% and those in India fell 18%, with the countries together accounting for almost 60% of world jewellery consumption. Buying rose 15% in the US and 21% in the UK as consumer confidence rose, it said.

Global bar buying slumped 57% to 212.1 tonnes in the three months through June and coin demand slid 50% to 46.3 tonnes. Global consumer demand was down 42% to 784.9 tonnes, according to the report.

Total consumption in China, which overtook India as the biggest user last year, dropped 52% to 192.5 tonnes, the council said. Indian demand fell 39% to 204.1 tonnes, returning as the largest purchaser on a quarterly basis for the first time since the end of 2012.

“Demand will total 900 to 1,000 tonnes in China this year and 850-900 tonnes in India, depending on Indian import restrictions and the strength of the country’s monsoon,” Grubb said.

ETP holdings

Investors sold 40.5 tonnes through exchange-traded products in the second quarter, data compiled by Bloomberg show. That compares with sales of 404.4 tonnes a year earlier. Assets reached 1,707.9 tonnes on 20 June, the lowest since October 2009, according to data compiled by Bloomberg.

Central banks added 117.8 tonnes to gold reserves in the second quarter, up 28% from a year earlier, according to the council. It expects them to add as much as 500 tonnes this year. Nations have been net buyers for 14 straight quarters, and added 409 tonnes last year, it said.

The council expects supply to peak this year and plateau over the next 12 to 18 months. Scrap supply was little changed at 262.7 tonnes in the quarter, while mine output rose about 4% to 765.3 tonnes, according to the report. Producer hedging, mostly from Polyus Gold International Ltd, rose from 8.6 tonnes in the first quarter and was the highest since 75 tonnes in the first quarter of 2001. Miners dehedged 15.1 tonnes in the second quarter last year.

“We don’t see any increase in hedging likely and we probably should see dehedges later in the year,” Grubb said. Bloomberg