Gold Demand Trends 2nd quarter 2016 The Indian perspective

Second highest H1 for gold demand on record.

Gold demand in Q2 followed the trends from the prior quarter: huge ETF inflows counterbalanced by anaemic jewellery demand amid rising prices. Investment was the largest component of gold demand for two consecutive quarters - the first time this has ever happened.

KEY THEMES :

Record H1 investment – 16% higher than H1 2009: US and European investors clamoured for gold bars, coins and especially ETFs. Gold price continued its climb: the US$ gold price rose 25% – the best H1 since 1980 – albeit with a few dips along the way. Jewellery depressed: barring a few exceptions, conditions were unfavourable for consumers in most markets.

Gold up 25%: strongest H1 price gain since 1980 

Thanks to unbridled investment inflows, the gold price has surged since the end of 2015. But so has volatility, which has had mixed results for consumer demand.

After starting the year with a stellar 17% Q1 gain, the gold price climbed further in the second quarter to set the seal on the strongest H1 performance for more than 35 years. In US$ terms, gold was one of the best performing investments in a basket of commodities that we monitor, behind only Brent crude (which burst higher on improving prospects for its supply dynamics)3 and silver.

And given that the US dollar has strengthened against a number of currencies this year, gold’s H1 performance when denominated in other currencies has been better still (Chart 2). Notable among these have been gains in the gold price expressed in pounds sterling (+37%), Indian rupees (+27%), Chinese renminbi (+27%) and Egyptian pounds (+41%).