Gold demand fell 16 percent in the second quarter, led by declines in India and China, the World Gold Council said.
Global demand slipped to 963.8 metric tons from 1,148.3 tons a year earlier as jewelry purchases fell to the lowest since the fourth quarter of 2012, the London-based council said in a report. China fell behind India as the largest consumer, with global jewelry buying dropping 30 percent and bar and coin demand down 56 percent. Mining companies hedged 50 tons as they continued selling future output.
Gold slid 28 percent in 2013, the most in three decades, as investors lost faith in the metal amid expectations U.S. policy makers would cut stimulus as the economy strengthens. Last year’s price drop spurred jewelry, coin and bar demand, particularly in China. Indian bullion buying has slowed as the government restricted imports to curb a current account deficit.
“Buyers in China and India were waiting to see a price trend develop,” Marcus Grubb, managing director of investment strategy at the council, said by phone yesterday from London. “It’s a market still returning to its fundamentals. It was an exceptional year and quarter last year.”
Gold for immediate delivery traded at $1,312.28 an ounce by 7:17 a.m. in London today for a 9.2 percent gain this year, according to Bloomberg generic pricing. It averaged $1,290 in the second quarter, down 9 percent from a year earlier and little changed from the first quarter.
Global jewelry demand declined to 509.6 tons in the latest quarter, the least since the final three months of 2012. China’s purchases slipped 45 percent and those in India fell 18 percent, with the countries together accounting for almost 60 percent of world jewelry consumption. Buying rose 15 percent in the U.S. and 21 percent in the U.K. as consumer confidence rose, it said.
Global bar buying slumped 57 percent to 212.1 tons in the three months through June and coin demand slid 50 percent to 46.3 tons. Global consumer demand was down 42 percent to 784.9 tons, according to the report.
Total consumption in China, which overtook India as the biggest user last year, dropped 52 percent to 192.5 tons, the council said. Indian demand fell 39 percent to 204.1 tons, returning as the largest purchaser on a quarterly basis for the first time since the end of 2012.
Demand will total 900 to 1,000 tons in China this year and 850-900 tons in India, depending on Indian import restrictions and the strength of the country’s monsoon, Grubb said.
Investors sold 40.5 tons through exchange-traded products in the second quarter, data compiled by Bloomberg show. That compares with sales of 404.4 tons a year earlier. Assets reached 1,707.9 tons on June 20, the lowest since October 2009, according to data compiled by Bloomberg.
Central banks added 117.8 tons to gold reserves in the second quarter, up 28 percent from a year earlier, according to the council. It expects them to add as much as 500 tons this year. Nations have been net buyers for 14 straight quarters, and added 409 tons last year, it said.
The council expects supply to peak this year and “plateau” over the next 12 to 18 months. Scrap supply was little changed at 262.7 tons in the quarter, while mine output rose about 4 percent to 765.3 tons, according to the report. Producer hedging, mostly from Polyus Gold International Ltd., rose from 8.6 tons in the first quarter and was the highest since 75 tons in the first quarter of 2001. Miners dehedged 15.1 tons in the second quarter last year.
“We don’t see any increase in hedging likely and we probably should see dehedges later in the year,” Grubb said.
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