Gold's current quarter has witnessed a divide.
In the second quarter of this year, the global gold market witnessed a significant shift in demand trends, as reported by the World Gold Council (WGC).
The consumption of gold in the jewelry industry increased from 244.5 tonnes in the same quarter last year to 390.7 tonnes this year. This increase was attributed to a slightly more robust economy, according to the WGC. However, the jewelry demand for the full year is forecasted to be significantly higher than last year's demand, with expectations ranging between 1,600 and 1,800 tonnes.
In contrast, investment demand for gold showed strong growth in the same period. Investors bought 243.8 tonnes of gold bars and coins in the second quarter of this year, a significant increase from the 156.7 tonnes bought in the same quarter last year. The WGC expects investment demand for the full year to be between 1,250 and 1,400 tonnes, which would be below last year's level of 1,773.3 tonnes.
Central banks were also active buyers of gold in the second quarter of this year, purchasing 199.9 tonnes compared to only 63.7 tonnes in the same quarter last year.
However, the demand for investment products, such as gold ETFs, decreased from the same quarter last year (584.2 tonnes to 284.5 tonnes). In the second quarter of this year, gold ETC demand decreased from 427.5 tonnes in the same quarter last year to 40.7 tonnes. This suggests that investors shunned physically-backed, exchange-traded gold products (ETCs) in the recent quarter.
For the second half of 2021, the WGC expects a divergence in global gold demand trends. The jewelry sector is anticipated to remain weak or decline, while investment demand is expected to grow. The WGC reported that gold jewelry demand was significantly pressured due to weakened consumer purchasing power and high gold prices, leading to contractions in major markets such as India and China.
Despite the decline in gold ETC demand, the WGC did not provide a specific forecast for gold ETCs demand for the full year. The Council did not provide a specific forecast for gold bars and coins demand for the full year either.
In summary, the second quarter of 2021 saw a shift in global gold demand trends, with jewelry demand decreasing and investment demand increasing. The WGC forecasts continuing weakness in the jewelry sector while expecting robust investment demand to underpin overall gold demand trends for the rest of the year.
Other sectors exploring investment opportunities might find appeal in the thriving gold market. Real-estate investors, for instance, could potentially capitalize on this growing investment demand for gold bars and coins, as anticipated annual purchases could exceed 1,250 tonnes based on World Gold Council projections. Additionally, shifts in demand patterns may indicate that some investors are diversifying their portfolios, moving away from physically-backed exchange-traded gold products (ETCs) and favoring gold bars and coins instead.
