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

A record-breaking flood of gold investment that has driven prices to all-time highs was not enough to stop a collapse in jewelry sales from cutting global demand for the metal by 6% in the first half of 2020, the World Gold Council (WGC) said.

The coronavirus pandemic triggered stockpiling of gold in Europe and North America as insurance against inflation and market turmoil, driving prices XAU= up almost 30% this year to more than $1,950 an ounce.

However, high prices and lockdowns strangled sales of jewellery, bars and coins in Asia.

Investors amassed a record 1,131 tonnes of gold, worth $60 billion, over the six months to June, up from 595 tonnes in the same period of 2019, the WGC said in its latest quarterly report on Thursday.

Use of gold in jewellery meanwhile plunged to 572 tonnes from 1,065 tonnes last year, it said, taking overall demand in the period to 2,076 tonnes.

“COVID-19 created the perfect storm for gold investment as historic (central bank) liquidity injections and record low interest rates significantly cut the cost of carrying gold,” said the WGC’s Louise Street.

“Consumer demand took a brutal hit.”

Investment will likely stay high and consumer demand should improve, Street said, pointing to better sales in China as it eased its lockdown.

Driving consumption in the first half were exchange-traded funds (ETFs) storing gold mainly on behalf of larger, financial investors, which added 734 tonnes, more than in any previous full year.

Sales of investment bars and coins were strong in Europe and North America but tumbled in Asia, with owners in Thailand even selling 41 tonnes back into the market, the WGC said.

Central banks, one of the key drivers of gold demand in recent years, cut purchases to 233 tonnes from 386 tonnes in the first six months of 2019.

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

GOLD DEMAND (T)*

H1 2020

H1 2019

% change

Jewellery

572.0

1,064.6

-46%

Technology

139.9

160.6

-13%

Investment

1,130.7

595.0

90%

  • Total bar and coin demand

396.7

476.0

-17%

  • ETFs & similar products

734.0

119.0

517%

Central banks & other inst.

233.4

385.7

-39%

Total demand

2,076.0

2,205.9

-6%

Q2 2020

Q2 2019

% change

Jewellery

251.5

529.6

-53%

Technology

66.6

80.7

-18%

Investment

582.9

295.0

98%

  • Total bar and coin demand

148.8

218.9

-32%

  • ETFs & similar products

434.1

76.1

471%

Central banks & other inst.

114.7

231.7

-50%

Total demand

1,015.7

1,136.9

-11%

Syed Zaki Hussain

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