India’s Q2 gold demand falls 25%, says WGC

“It is fair to say that investment demand for the quarter remained muted given the continuing recovery in the US economy and booming stock markets in India and China during the quarter”, Alistair Hewitt, head of market intelligence at the World Gold Council, said in a statement.

Gold demand was down by 3% in China.

While Chinese demand for jewellery was down 5% at 174 tonnes on slowing economic growth and a stock market bubble burst that wiped out almost 30% gains, India’s jewellery demand fell 23% to 118 tonnes on unseasonal rains in Q1 and monsoon deficit in Q2 that impacted rural incomes.

Chinese consumer demand fell 3 percent, with consumer sentiment damaged by volatility in equities and concerns over decelerating growth.

Gold demand in both countries is set to recover again in the second half of the year, according to the WGC, with China and India each likely to consume 900 to 1,000 tons of gold in the year as a whole.

The analyst highlighted that, in reality, demand has been fairly consistent overall when seen as part of a longer term trend.

Jewellery demand in volume terms faced the biggest decline in demand – Q2 was down 81.1 tonnes (t) year-on-year or amounting to 513.5t, dropping 14 percent on y-o-y basis.

“Many of the coins being bought are in smaller denominations, which we can contrast to the financial crisis, when there were larger denominations being bought”.

“Stock market turbulence also impeded demand”, it added.

The council added that the People’s Bank of China’s announcement is supportive for the global gold market, as it “reinforces gold’s position as a key reserve asset in helping central banks to diversify away from the US dollar”. ETFs saw outflows totalling 23t, lower than the outflows of 38t seen in the same quarter a year ago. It was the 18th consecutive quarter where central banks were net purchasers.

Chart provided by The World Gold Council.

Total gold recycled in India in Q2 of 2015 was 24 tonnes compared with 22.5 tonnes in Q2 of 2014.

On the supply side, total supply contracted by five percent year-on-year, to 1,032.6 tonnes in the second quarter despite another quarter of modest growth in mine production. “In any case, the groundswell of these imports have contributed to the inventory overhang in the market”, according to the council.

These two markets accounted for nearly half the fall in global demand, WGC said.

We develop gold-backed solutions, services and products, based on authoritative market insight and we work with a range of partners to put our ideas into action. “When the GDP (gross domestic product) goes up, there will be demand for gold”, he said.

Spot gold was heavily rangebound in the second quarter, with the spread between its highs and lows the narrowest of any quarter in eight years.