Spot gold ended at $2,443.29 an oz. on Aug. 2, and it has largely held onto the good points made this 12 months, which noticed a sustained rally to an all-time excessive of $2,483.60 on July 17.
The World Gold Council launched its quarterly report final week and the trade group reported whole demand of 1,258.2 metric tons within the second quarter, the very best on document for a second quarter and a few 4% above the identical interval in 2023.
However the breakdown of the demand figures exhibits some tendencies which will level to a slowdown in coming quarters.
The largest achieve in demand was from what the Council known as the “over-the-counter” (OTC) market, which largely means shopping for from institutional traders, excessive net-worth people and household places of work.
OTC demand was 329.2 tons within the second quarter, up 53% from the identical quarter in 2023 and an enormous leap of 385% from the primary quarter.
The Council attributed the surge in OTC urge for food to “portfolio diversification,” which ends up in the query as to how sustainable this demand is, given that when these traders have reached the purpose the place they really feel they’ve adequate gold of their asset combine, they’ll seemingly ease again on purchases.
The report additionally confirmed a powerful decline in jewelry consumption, which dropped to 390.6 tons within the second quarter, down 19% from the identical interval in 2023.
Becoming a member of jewelry within the shedding column was official cash, the place demand dropped 38% to 52.7 tons within the second quarter.
Each of those sign that customers could also be beginning to pull again on purchases due to the sturdy achieve in costs.
China, India
Of specific concern is jewelry demand in China and India, the 2 largest consumers of bodily gold, which collectively account for nearly half the market.
China noticed jewelry demand hunch 35% within the second quarter to 86.3 tons, whereas India recorded a 17% fall to 106.5 tons, based on the Council report.
An extra signal that China’s urge for food for gold could also be waning considerably was the 18% drop in web imports through Hong Kong in June, with official information exhibiting imports of 21.92 tons, down from 26.72 tons in Might.
China doesn’t disclose gold import volumes, making the Hong Kong information a key proxy for demand on the earth’s high client.
India’s client demand is more likely to get a lift within the present quarter after the federal government reduce the import responsibility to six% from 15%, however that is additionally more likely to show to be a one-time sugar hit to demand, fairly than a sustainable shift to larger demand.
Larger costs additionally seemingly weighed on flows into Trade Traded Funds (ETFs), with the Council figures exhibiting a web drop of seven.2 tons within the second quarter, which adopted a decline of 113 tons within the first.
Central financial institution shopping for additionally eased within the second quarter, coming in at 183.4 tons, down from the 299.9 tons within the first, though up 6% from the 173.6 tons within the second quarter of 2023.
Total, there are sufficient components to recommend that the rise to a document excessive for gold is beginning to crimp among the extra price-sensitive demand.
But it surely’s not all dangerous information, with investor curiosity more likely to be maintained by the continued expectation that financial coverage in a number of key international locations is more likely to be eased, with a selected deal with seemingly rate of interest cuts by the US Federal Reserve.
Excessive geopolitical tensions, with ongoing battle within the Center East and Ukraine, in addition to political threat surrounding what’s shaping to be a decent US presidential election are additionally more likely to maintain curiosity in gold excessive.
The mix of bearish and bullish components for the yellow metallic might find yourself having the impact of retaining the worth in a comparatively slim vary for the remainder of the 12 months.
(The opinions expressed listed below are these of the writer, Clyde Russell, a columnist for Reuters.)
(Enhancing by Sonali Paul)