Demand for gold "reverts to long term trends"

Photo: Gold Alert

The WGC's report for the second quarter of 2014 shows that global jewellery demand remains the biggest factor in terms of gold trading, accounting for half of the market. Demand, though, has dipped 30 per cent year-on-year to 510t.

India and China remain significant drivers of the global jewellery market, purchasing 154t and 143t respectively, although demand from Indian buyers has fallen 39 per cent year-on-year, with Indian demand for investment gold falling even further.

China, meanwhile, is stepping up its gold demand. Why? The World Gold Council notes that China’s middle class is expanding - indeed, it is set to grow by over 60 per cent in coming years to a total of 500 million, even larger than the total 319 million population of the US.

Central banks increased purchasing by 28 per cent to 118t compared with the same period last year, as they continued to use gold as a hedge against risk and diversify away from the US dollar.

Total investment demand (combined investment in Bars and coins and ETFs) was up 4 per cent to 235t. However, there was a 56 per cent decrease in bar and coin demand from 628t in Q2 2013 to 275t in Q2 2014 following unprecedented levels of demand last year.

Taken together, they indicate that gold demand is reverting to long term trends after an "extraordinary 2013", concludes the WGC.