Consumer buys gold while institutions sell; gold demand remains stable: World Gold Council

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Consumer investment in gold increased in the second quarter of 2021 but some investors were less bullish, according to the World Gold Council’s latest Gold Demand Trends report. The two forces helped create a gold demand of 955.1 tonnes over the quarter, a 9% rise from the first quarter of 2021. Last year, the demand for gold during the same period was pegged at 960.5 tonnes.

Between April and June this year, most traditional indicators of consumer gold purchasing were positive. Bars and coins – a category of physical gold products overwhelmingly bought by retail investors – saw a fourth consecutive quarter of year-on-year gains, with 243.8 tonnes purchased over the three-month period.

 Meanwhile consumers bought gold jewellery with a combined weight of 390.7 tonnes, 60 per cent more than the equivalent quarter last year.

While both consumers and retail investors were purchasing again, institutional investors were less consistent. There were only modest net inflows of 40.7 tonnes during Q2 into gold Exchange Traded Funds (ETFs). These inflows only partially offset the heavy outflows the industry witnessed in the previous quarter, making 2021 the first time since 2014 with net outflows in the first six months of the year.

Central banks however continued to buy gold throughout the quarter. Global gold reserves grew by 199.9 tonnes in the second quarter of this fiscal, said the WGC report.

The World Gold Council estimates jewellery demand could be in the range of 1,600 – 1,800 tonnes for the year, well above 2020 levels but below its five-year average. Investment demand should be in the region of 1,250 to 1,400 tonnes, slightly less than last year but in line with the ten-year average. Central banks are likely to continue buying gold on a net basis in 2021 at the same rate or above that of 2020, and the supply of gold in 2021 is expected to increase modestly, when compared to the previous year.

Louise Street, Senior Markets Analyst at the World Gold Council, commented: “As the global economic recovery continues, we have been encouraged to see consumer demand returning, with strong year-on-year growth in jewellery.

Key findings included in the latest Gold Demand Trends report for Q2 2021 are as follows:

Overall demand (excluding OTC) declined in Q2 by 1% year-on-year to 955.1t
ETFs saw inflows totalling 40.7t (US$2.4bn)
Bar and coin demand was at 243.8t, an increase of 56% y-o-y; achieving its best quarter since 2013
US dollar gold price averaged US$1,817.4/oz, 6% higher than in Q2 2020
Global jewellery demand improved to 390.7t, a year-on-year increase of 60^%.
Central banks were net buyers of 199.9t with the largest purchases by Thailand, Hungary and Brazil
Demand in the technology sector 18% higher y-o-y at 80t
Total supply was 13% higher y-o-y, rising to 1,172t as the industry experienced far less Covid-related disruptions

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