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WGC Q2 Demand Trends

WGC Q2 Demand Trends

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Published by Claude
The latest World Gold Council Gold Demand Trends report, which covers the period April-June 2013, highlights how recent falls in the gold price have generated significant increases in demand, most notably from consumers in China and India - by far the biggest markets for gold - compared with the same time last year.
The latest World Gold Council Gold Demand Trends report, which covers the period April-June 2013, highlights how recent falls in the gold price have generated significant increases in demand, most notably from consumers in China and India - by far the biggest markets for gold - compared with the same time last year.

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Published by: Claude on Aug 20, 2013
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Gold Demand Trends
Second quarter 2013
August 2013 www.gold.org
Q2 gold demand totalled 856.3 tonnes,worth US$39bn. Lower prices generatedanother surge in quarterly jewellerydemand, most notably in India and China.Record quarterly investment in gold barsand coins was countered by sizeable
reacted to a seemingly more positive
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Louise Street
Krishan Gopaul
Johan Palmberg
Juan Carlos Artigas
Marcus Grubb
Managing Director, Investmentmarcus.grubb@gold.orgScan with yourmobile device toaccess our researchapp for investors
-402.2Q2’12 Jewellery Technology Total barand coindemandETFs andsimilarproductsCentralbank netpurchasesQ2’13 Net changeQ2’13 – Q2’1202004006008001,0001,2001,4001,600
Overall demand changes (Q2’13 vs Q2’12, tonnes)
Source: Thomson Reuters GFMS, World Gold Council+154.7+0.9+221.7-93.4-118.2
Executive summary 02Global gold market –second quarter 2013 review 06Jewellery 06Investment 08Central banks 10Technology 10Supply 11Gold demand statistics 13Appendix 21Notes and definitions 25
Gold Demand Trends |
Second quarter 2013
Executive summary
being a marked contraction in recycling.
The 12% decline in tonnage demand translated into a 23% dropin value to US$39bn – its lowest level for more than three years(
Table 1
). Q2 saw an absolute drop in the gold price of morethan US$400/oz – a double-digit decline in the average quarterlyprice compared with both Q1 2013 and Q2 2012 (
Table 2
). Inthe context of this price move, the decline in value terms isunsurprising. That total bar and coin demand was able to reach arecord value of US$23.1bn in spite of such a sizeable price moveis testament to the strength of demand in that sector.The price action also had an impact on the supply side of thegold market resulting in a sharp contraction in recycling. In what
Table 1: Q2 2013 gold demand overview
TonnesUS$mnQ212Q2135-yearaverageYear on Year% changeQ212Q2135-yearaverageYear on Year% change
Jewellery420.8575.5503.93721,77526,17920,85420Technology103.3104.3108.815,3484,7434,528-11Investment285.9105.4374.5-6314,7944,79415,779-68Total bar and coin demand285.9507.6297.77814,79523,09112,96856ETFs and similar products0.0-402.276.8--1-18,2972,809-Central bank net purchases164.571.149.9-578,5143,2362,776-62
Gold demand
974.6856.31,037.1-1250,43038,95243,936-23Source: Thomson Reuters GFMS, World Gold Council
is a normal reaction to sharply weaker prices, recycling activityshrank – primarily due to consumers in developing marketsholding onto their stocks of old gold as the profit motive wanedalong with the gold price. Please see the section on supply for amore in depth discussion of recycling.The second quarter saw: 1) a continuation of the strongrecovery in consumer demand for jewellery; 2) the prominentrole of India and China on the global stage; 3) a divergencebetween different elements of investment; and 4) a shift infocus from West to East – all of which were amplified comparedto last quarter.
The great gold jewellery rush
Having flexed their muscles in the first quarter, jewelleryconsumers were out in force again in Q2, pushing the value ofdemand to near-record levels. Tonnage surged to such an extent– far outweighing the decline in the average gold price – thatdemand in value terms was up 20%.Although jewellery demand is influenced by a wide set offactors, including economic growth, consumer sentiment anddisposable income, to name a few, all were eclipsed by theeffect of the drop in the gold price. The resultant buying frenzycaused a huge rise in regional premiums on gold, as supplychain bottlenecks caused delays in meeting demand.The upward trend was almost universal, with the most notableyear-on-year improvements occurring in India, China, theMiddle East and smaller Asian countries. The focus in mostmarkets was on higher carat jewellery with its connotationsas an investment proxy. Europe was the only region not to seean improvement in jewellery demand, unsurprisingly in light ofcontinued concerns over the region’s economic wellbeing.As we had expected, the US delivered a second consecutivequarter of growth, with lower jewellery price points wellreceived. Although demand was again healthiest at the high endof the US market, there was also evidence of a slowdown in theshift to lower carat items in the middle segment. Demand wasaugmented by growth at the wholesale level, with lower pricespresenting a favourable opportunity to embark on early stockbuilding in preparation for the seasonally strong fourth-quarter.
Table 2: Average gold prices in various currencies
20112012Q212Q312Q412Q113Q213Q2’13vsQ2’12% chg
 /oz1,129.91,298.71,254.71,320.21,328.81,235.61,083.2-14£/oz980.81,053.01,016.61,045.31,072.61,051.6921.4-9CHF/kg44,649.650,323.748,464.751,088.551,603.748,792.542,865.7-12¥/g4,015.84,278.24,144.44,174.84,478.64,834.74,492.58Rs/10g23,624.128,639.428,004.829,302.129,964.728,420.825,381.0-9RMB/g326.3338.5327.6337.3345.7326.5280.0-15TL/g85.496.693.595.899.393.683.6-11Source: LBMA, Thomson Reuters Datastream, World Gold Council
The consumer market for gold was once again dominated byglobal leaders India and China, which together accounted foralmost 60% of the global jewellery sector and around halfof total bar and coin demand. On a year-to-date basis, totalconsumer demand (for jewellery, bars and coins) in each countryis almost 50% ahead of the same period in 2012.In both markets, the strength in second quarter demand wasindicative of opportunistic buying not only at the consumer levelbut also by the trade, which used the opportunity to bolsterstocks. This attitude among consumers is perhaps a moresurprising result for China, where the historical tendency hasbeen to buy into a rising trend, and is more remarkable for thefact that the second quarter is traditionally a seasonal low pointfor gold, coming as it does after the Q1 peak of Chinese NewYear-related purchases. However, the response in part reflectsthe strength of positive price expectations in the market,a view that was replicated in India and which is borne out byWorld Gold Council survey results, as discussed overleaf.

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