Cape Times

Gold demand hits a six-year low

Second quarter decline seen boosting market by year-end

- Dineo Faku

GLOBAL demand for gold tumbled by 12 percent to 914.9 tons, a six-year low, in the quarter to June on lower appetite from Asia, the World Gold Council said in its quarterly report on gold demand trends yesterday.

Despite the decline, the outlook for the second half of the year was positive with consumers responding to the recent price drop by buying gold, the report noted.

Consumer demand for gold in China and India accounted for almost half of the fall. However, demand in Europe and the US grew, driven by the mix of confident jewellery buyers and strong demand for bars and coins.

Alistair Hewitt, the head of market intelligen­ce at the World Gold Council, said the quarter had been challengin­g, particular­ly in Asia, on the back of falls in India and China. “The reverse is true for western jewellery markets, as increased economic confidence led to continued growth in consumer demand. 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,” he said.

Gold stocks declined on the JSE yesterday in tandem with the bullion price, which dropped 0.71 percent to $1 116 (R14 276) an ounce, after the devaluatio­n of the Chinese yuan triggered demand for safe-haven commoditie­s on Wednesday.

Global gold mine production rose 3 percent to 786.6 tons, the report said.

Sibonginko­si Nyanga, an analyst at Imara SP Reid, said it was expected to taper off at the tail end of this year and to level out after three years of decline in exploratio­n and developmen­t activity.

Report

“This report has not mentioned South Africa, but we know that South African gold production has been in a declining trend, so the current drop in production is not a blip but part of a larger trend that goes back several decades,” Nyanga said yesterday. “Mine production costs remain high and gold producers have had their margins squeezed.”

According to the report, total jewellery demand was 513.5 tons in the second quarter, a 14 percent drop compared with the previous comparativ­e quarter in 2014.

Demand in China fell 5 percent to 174.4 tons and in India it was down 23 percent to 118 tons in the quarter.

US demand was up 2 percent to 25.5 tons, and Europe rose by 1 percent to 14.6 tons.

Jewellery demand came under pressure from negative consumer sentiment, while investment was a casualty of ‘directionl­ess prices’ and stock market gains.

“Gold prices were largely directionl­ess between March and June. This was both the cause and effect of weak demand,” the report said.

In US dollar terms, gold traded within a narrow $70 an ounce range during the second quarter.

Volatility was just 13 percent, compared with its fiveyear average of 18 percent.

“Such sideways price movement meant that consumers in a number of markets were discourage­d from buying gold as they were uncertain as to whether there would be an opportunit­y to buy at lower levels,” the report said.

 ?? FILE PHOTO: BLOOMBERG ?? The World Gold Council says that largely directionl­ess prices are the cause and effect of weak demand.
FILE PHOTO: BLOOMBERG The World Gold Council says that largely directionl­ess prices are the cause and effect of weak demand.

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