World Gold Council: Gold Demand Hit Six-year Low in Q2

The gold price continued to fall last quarter, and it appears that demand for the yellow metal was also on the decline.
In its latest quarterly report on gold demand trends, the World Gold Council states that gold demand fell 12 percent in Q2, marking a six-year low. Gold demand grew during the quarter in Europe and the United States; however, that wasn’t enough to offset slowing consumer demand in China and India, which the World Gold Council says accounted for about half of the drop in demand for gold.
“It’s been a challenging market for gold this quarter, particularly in Asia, on the back of falls in India and China,” said Alistair Hewitt, head of market intelligence at the World Gold Council, in a statement. “The reverse is true for western jewellery markets, as increased economic confidence led to continued growth in consumer demand.”
Jewelry demand and global investment demand both fell for the quarter, with the organization stating that heavy rains in India in Q1, followed by droughts in Q2, put pressure on rural incomes, in turn affecting gold demand. In China, demand fell 5 percent for the quarter as “decelerating GDP growth and stock market fluctuations hurt sentiment” in the country.
That said, central banks are still buying plenty of gold — purchases came in at 137 tonnes for the quarter to mark the 18th consecutive quarter where banks were net gold purchasers. Furthermore, Grexit fears drove up retail investment demand in gold by 19 percent year-on-year, while bullion coin sales hit a 17-month high in the US this June.
On the supply side, numbers fell as well. Gold supply fell 5 percent as a drop in recycling outweighed rises in mine production for the quarter. The World Gold Council sees mine production continuing to soften in the second half of the year “as the gold mining industry continues to manage their costs and optimise operations in the face of challenging markets.”

The gold price has taken back some of its losses in the past week (the spot gold price is up $30, or 2.78 percent, since August 5). Even so, the yellow metal is still down about 6 percent so far this year. And as the World Gold Council’s report notes, the gold price fell sharply at the start of Q3.
Certainly, falling demand and a falling price might be leaving gold investors a little anxious. However, the World Gold Council sees prospects looking up for gold demand in the second half of the year. Its report states that consumers are “responding to the recent price drop” in gold, also noting that “there are tentative signs that the recent drop in gold prices has lifted appetite for gold in both China and India, with interest having picked up a little following the price fall.”
Consumer demand could be looking stronger for other reasons as well. “Jewellery market prospects look healthier for the remainder of the year with the upcoming wedding and festival season in India,” according to Hewitt.
More broadly, the World Gold Council sees the recent disclosure of a 60-percent increase in Chinese gold reserves as supportive for the gold price. “While some may feel the increase was low-field, the number was in line with our expectation,” the report states. “The PBoC’s announcement is, in our view, supportive for the gold market: it reinforces gold’s position as a key reserve asset in helping central banks to diversify away from the US dollar.”

Company news

Kaminak Gold (TSXV:KAM) reported results from a 2015 infill drill program at its Coffee project in Canada’s Yukon, as well as results of step-out drilling at its Kona North deposit. Infill drilling is now complete on all deposits at Coffee.
Rockhaven Resources (TSXV:RK) put out results from drilling at its Klaza property, also located in the Yukon. Highlights include 11.28 g/t gold, 75.9 g/t silver and 7.37 percent zinc over 3.68 meters. So far this year, 12,000 meters of diamond drilling in 45 holes have been completed at the project.
Corvus Gold (TSX:KOR,OTCQX:CORVF) commenced Phase II of a 2015 drill program at its North Bullfrog project in Nevada. Goals of the program include testing new discovery targets in the Eastern Steam-heated zone and defining new systems similar to the high-grade Yellow Jacket discovery.
Asante Gold (CSE:ASE) secured an agreement to acquire up to a 100-percent interest in the Betanase permit in Ghana. It adjoins the Kubi mining lease, also currently optioned by the company.
 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Corvus Gold and Asante Gold are clients of the Investing News Network. This article is not paid for content.