World gold demand fell 9 percent in the second quarter to 719.5 tonnes as rising prices and the impact of the global recession curbed jewellery consumption, the World Gold Council said on Wednesday.
However, a sharp rise in identifiable investment demand to 222.4 tonnes from 151.9 tonnes a year earlier limited the decline, with demand for gold-backed exchange-traded funds rising sharply year-on-year.
«The global economic downturn has certainly had a major impact on the purchasing power of gold consumers, as have high local prices and dollar volatility," said WGC chief executive Aram Shishmanian.
However, he added: „Investment demand in particular witnessed a strong quarter, and we believe this indicates a growing recognition of gold as an important and independent asset class.“
ETF inflows slipped to 56.7 tonnes in the second quarter from a record 465.10 tonnes in the first three months of the year, but were still well ahead of last year's second-quarter inflows of just 4 tonnes.
Net retail investment — which covers small investment products such as bars and coins — climbed 12 percent year-on-year to 165.7 tonnes.
Jewellery demand fell 22 percent year-on-year in the second quarter to 404.1 tonnes from 517.8 tonnes previously. Demand from India, traditionally the world's biggest gold consumer, slid 31 percent to 88.0 tonnes from 175.1 tonnes.
«The local gold price hovered at near record highs during the quarter, and the domestic economy remained under pressure from the global recession," the WGC noted in its report.
However, China, the second largest consumer last year, reported a 6 percent rise in jewellery sales to 72.5 tonnes, with sales in Greater China — which includes Hong Kong and Taiwan — up 9 percent to 9,964 tonnes.
On the supply side, central banks turned into net purchasers of gold, the WGC said, with 14 tonnes of gold bought by the official sector in the quarter, against net sales of 69 tonnes in the same quarter last year.
Net sales in the first half of the year totalled 38.7 tonnes, it said, the lowest level since the first half of 1997.
„Central banks outside the Central Bank Gold Agreement have been net purchasers since the second half of 2006 and gross purchases of almost 30 tonnes were recorded by central banks outside the CBGA during Q2 2009," the WGC said.
«Although confidentiality issues prevents a detailed dissection of the numbers, it is worth noting that these purchases comprise modest net additions in a number of countries, rather than large purchases by just one or two countries.“
Elsewhere scrap supply eased to 334 tonnes in the second quarter from a record 566 tonnes in the first quarter, but was up 21 percent from last year's 276 tonnes.
Overall world gold supply was up 14 percent year-on-year to 927 tonnes from 812 tonnes, the WGC said.
Author: Jan Harvey