India and China dampen global gold demand in Q2: WGC

The World Gold Council’s Gold Demand Trends Q2 2015 report notes that a decline in demand from consumers in India and China has been a major factor in the 12 percent drop in demand. The demand for the said quarter stood at 915 tonnes from 1,038 tonnes in Q2 2014. Both markets accounted for almost half the fall in global demand.

Jewellery demand in volume terms faced the biggest decline in demand – Q2 was down 81.1 tonnes (t) year-on-year or amounting to 513.5t, dropping 14 percent on y-o-y basis. WGC attributed this to weakness across Asia and the Middle East and the difficulties faced by India’s rural population majorly impacting demand.

Investment took a beating due to directionless prices and stock market gains, according to the report. The report noted that Gold prices were hovering directionless between March and June, which was both the cause and effect of weak demand. In US dollar terms, gold traded within a narrow US$70 range. Volatility was just 13 percent, compared with its 5-year average of 18 percent. The sideways price movement denoted consumers being discouraged from buying gold on the anticipation of an opportunity to buy at lower levels. The fall was chiefly due to the weakness in the key markets of India and China, both of which were dictated by market-specific issues.

India’s jewellery demand 23 percent to 118 tons. WGC attributed this to the unseasonal rainfall that damaged crops in Q1 and the consequent impact on incomes among the all-important rural population. Additionally, a relative dearth of auspicious days for marriages in June and July hit wedding-related demand in Q2. But in the first half of the year, India’s gold jewellery demand dropped 3 percent on y-o-y basis.

China’s gold jewellery demand dropped 5 percent to 174 tons, which was attributed to Continued economic slowdown, deceleration in domestic GDP growth and severe fluctuations in the domestic stock market which hurt consumer sentiments and jewellery demand.

In this period, through declines were widespread across Asian and Middle Eastern markets, the Western gold jewellery markets showed some positive results. The US posted a small 2 percent increase on y-o-y basis, which characterizes it with a slow and steady pace of increase. Consumers were encouraged by lower prices, as verified by an 11% year-on-year rise in gold jewellery imports for April and May.

Overall Supply declined by 5% year-on-year in the second quarter.