Gold demand hits 4 year low as investors pull out - WGC
Reuters reported that gold demand hit 4 year low in the second quarter, despite surging appetite for jewellery, coins and bars, as investors exited bullion funds and central bank buying more than halved.
The World Gold Council said that lower prices following a selloff in April, when spot gold dropped USD 200 an ounce in two days in its sharpest slide in 30 years, and another retracement in June sent bar and coin demand to record highs and jewellery buying to its strongest in nearly 5 years.
The WGC said that consumer demand rose by more than half to 1,083 tonnes in the three months to end June from a year earlier. But a 402.2 tonne outflow from gold backed exchange-traded funds popular investment products that issue securities backed by physical gold and a 93.4 tonne drop in central bank purchases knocked overall demand down 12 percent to a net 856.3 tonnes, its lowest since the Q2 of 2009.
Mr Marcus Grubb MD for investment of WGC said that "It's clear that this will be a down year in tonnage terms for demand. The key will be how successfully that gold coming back in from the ETFs is re absorbed by the other categories of investment and other areas that are growing strongly, like jewellery demand."
The heavy liquidation from gold backed ETFs in the Q2 brought outflows for the year to 578.7 tonnes. Speculation the Federal Reserve might be set to curb its bullion friendly quantitative easing had spooked investors.
Gold prices have fallen by around a fifth this year, hitting a three year low in June of USD 1,180.71 an ounce. They are currently at around USD 1,320, some USD 600 below their September 2011 record high of USD 1,920.30 an ounce.
The WGC said that it expected central bank purchases this year to fall to 300 tonnes to 350 tonnes from 544.4 tonnes in 2012 after a 100 tonne drop in the H1. This year's price volatility is likely to have affected the timing of central banks' gold buying.
Mr Grubb said that "We would have expected more buying on the price dip, but also sentiment in the second quarter was negative many (expected) gold would fall further so we think this is a delay in purchasing rather than a change in strategy."
Source - Reuters