Consumer Demand For Gold Drops, Gold ETF Inflows At Record High

Investor gold rush in the west offsets collapse of Asian market WGC

Meanwhile, jewellery demand globally slumped for a second consecutive quarter, plunging 53 per cent year-on-year to 251 tonnes, its lowest-ever level.

Gold demand in India plunged 70 per cent during the April-June quarter to 63.7 tonnes compared with the same period previous year mainly due to the nationwide lockdown to prevent the spread of COVID-19 and high prices, according to a World Gold Council (WGC) report.

Inflows into gold-backed ETFs (gold ETFs) accelerated in Q2, taking H1 inflows to a record-breaking 734 tonne.

"Q2 2020 was defined by lockdowns and high prices, both of which acted in combination to keep India's gold demand record low at 63.7 tonnes, down 70%".

Global gold demand declined by 11 per cent during April-June to 1,015.7 tonne, but the demand for the yellow metal as an investment category witnessed a significant surge during the period, says a report.

In contrast, bar and coin investment declined sharply in Q2 driven by Asian weakness and leading to a 17% decline to 397t in H1.

However, demand could jump by 350 tonnes in a single quarter if life as we know it comes back, he said. The gold price reached record highs in numerous other currencies, including euros, sterling, rupee and renminbi, among others. If the gold market should stumble or equities sell-off in the face of the continuing rise in COVID-19 infections and deaths (and their impact on the global economies, especially the US), then the price of the metal (and silver) will drop. India's GDP growth has been on a downward trajectory since Q1 2019 and this was accentuated by the outbreak of COVID-19.

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The coronavirus pandemic triggered stockpiling of gold in Europe and North America as insurance against inflation and market turmoil, driving prices up nearly 30 percent this year to more than Dollars 1,950 an ounce. Economic slowdown, job losses and restrictions on store operations meant consumers became more cautious in opening their wallets to buy gold.

Total gold supply in the period was 2,192 tonnes, down 6 percent year on year.

Similar factors were behind a 13% fall in gold used in technology to 140 tonnes in H1, as end-user demand for electronics collapsed.

The WGC report also said that India's gold demand for the full year 2020 is expected to fall to the lowest level in 26 years with domestic bullion prices hitting a record high and as falling disposable incomes could curtail retail purchases.

But that fall came from reduced flows in the three largest markets, Asia, Europe and North America, which together account for almost 90% of global scrap supply.

The consumer-focused sectors will likely remain subdued for the next six months, however, the ongoing economic uncertainty and the threat of further waves of the pandemic mean that "gold's safe haven status will appeal to investors for the foreseeable future", Ms Street said.

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