Gold Demand Up - Coin and Bar Demand Down

On Friday 1^st August the World Gold Council published its report

“Gold Demand Trends Q2 2019”.

Here are the component parts:

Gold demand was 1,123t in Q2, up 8% y-o-y
H1 demand jumped to a three-year high of 2,181.7t, largely due to record-breaking central bank purchases. In Q2 central banks purchased 224.4t of gold increasing purchases for the First half of 2019 to 374.1t – increasing global gold reserves to the highest level since the Gold Council recorded this data some 19 years ago. Its worth noting that much of this gold was purchased by emerging market countries
Growth in H1 jewellery demand was largely the product of a more positive environment for Indian consumers who pushed Q2 demand up by 12% to 168.8t. The wedding season boosted this demand but when prices rose in June demand virtually ceased – which shows the price sensitivity of gold in the Indian economy.
Shifts in bar and coin investment were very much price-related: as the gold price powered its way to multi-year highs, profit-taking kicked in and retail investment all but dried up. In fact, Bar and coin investment fell 12% in Q2 to 218.6t. Now this may surprise many of our listeners, but the first Quarter of this year was also poor resulting in the first half of 2019 having the lowest level of gold bar and coin demand for 10 years – just 476.9t. perhaps this point alone can show you why the pumpers with their precious metal companies are so keen to have you believe that gold is going to $10,000 any time soon – people are simply not buying it in the quantities they need to maintain significant profitability.
The technology sector also reduced its usage of gold due to challenging global conditions.
However, Holdings of gold-backed ETFs grew 67.2t in Q2 to a six-year high of 2,548t. According to the World Gold Council, “The main factors driving inflows into the sector were continued geopolitical instability, expectation of lower interest rates, and the rallying gold price in June.”
Gold supply also increased by 6% in Q2 to 1,186.7t a mix of record mine supply and a 9% rise in recycling resulting in the 2019 H1 supply figures reaching 2,323.9t – the highest level since 2016.

Against this backdrop our regular listeners will know that we have produced numerous YouTube videos on gold and that in sterling terms its price is at all time record highs and also multi year highs in US dollar terms having broken above $1400 (and now standing at $1440) for the first time since 2013.

This rise is attributable by the World Gold Council to

Expectations of lower interest rates
Political uncertainty
Strong central bank buying

Before we close, we want to focus a little more on bar and coin demand as that is of more interest to us on this channel as most of us are involved in stacking these shiny pieces of alluring metal.

The retail investment market has been soft in Q2 now experiencing its third consecutive quarter on quarter decline and demand has fallen 12% year to year. According to the World Gold Council, China accounted for around two thirds of the fall and that global H1 demand at 476.9t was at its lowest level since 2009.

As prices rose in June 2019 retail investment stalled – this market is price sensitive – and with China continuing to devalue its currency, gold will pro rata become even more expensive.

Now you may ask then why has the price risen so much, well much of it has been made up by, wait for it, speculative trading activity on the Shanghai Gold Exchange. Yes, the very people that the pumpers accuse of pushing gold and silver prices down with their paper contracts are the very people who are now causing it to rise. In fact, trading volumes on this exchange “shot through the roof” according to the WGC with volumes hitting 2,062t the second highest level on record.

Oh! the irony – the pumpers may be bailed out by the very speculators they condemn.

India on the other hand increased its physical coin and bar demand by 13% Y-to-Y whereas demand in the Middle east was down 27% and especially Iran, down in East Asia and especially Thailand and weak in the US.

In Europe as a whole, demand for Q2 stood at 32.4t its lowest level since 2008

In the US Q2 demand was 3t reducing the first half of 2019 demand to just 9.8t the lowest level since 2007. Also, Q2 bullion coin sales from the US Mint fell to 19,000oz – the lowest level since Q3 2006.

You may remember when the gold price rose just over a week ago, we stated that we had spoken to 3 UK dealers and each of them said, people were selling their gold to them, well the WGC says the same thing about America.

“The gold price rally in June triggered selling by some investors, and coin premiums in the secondary market fell to their lowest level since before the global financial crisis, spurring gold exports from the US to Germany.”

Now you can see why the Pumpers who own gold and silver retail businesses produce the videos and reports that they do – quoting $5,000 gold and $10,000 gold and $50,000. If retail sales do not pick up they will go out of business. Yes most of us are buyers of gold, but we do so for the long term. We aren’t taken in by these snake oil salesmen – who one day will be right, but how many people will have lost money in the interim?

The World gold Council represents the Industry and is sponsored by many mining and gold companies. Its not always correct but its seldom far from being correct. It paints a sober picture to each and everyone of us that when gold prices rise, physical demand, so far at least has fallen. Supply is up and the reason prices are rising are a mix of lower interest rates, political and trade disruption, central bank buying, and most of all speculation by traders.

Just bear all of this in mind, and remember, when these factors eventually resolve they will reverse and then we shall see prices come down. Not necessarily right now, as there are too many tailwinds in favour of gold, however, make sure you are ready for when that day does come.

Relevant Videos:

Gold Soon to Reach its All-Time High – In Sterling That Is