Vogue for yellow gold boosts buying in second quarter of 2014.
The latest global gold demand trends from the World Gold Council (WGC) have revealed a 21% increase in UK gold demand for Q2 2014, compared to the same period in 2013.
The quarterly reports from the WGC outline demand by country, as well as by sector. Global gold demand for jewellery in Q2 – from April to June 2014 – represents more than half of total global gold demand.
Total global gold demand for all sectors reached 964 tonnes in Q2, 16% lower than the same period last year, as consumers and investors pulled back and consolidated their activity.
Overall, global gold demand for jewellery fell 30% year-on-year to a total of 510 tonnes. Despite this decline, global gold demand has been on an upwards trajectory since 2009, with India and China remaining the leaders in terms of overall demand in the second quarter.
The gold price also fell in the second quarter, with the London PM Gold Fix sitting at an average of US$1,288 (£771) per ounce, falling 9% compared to Q2 2013.
The World Gold Council’s managing director of investment strategy Marcus Grubb said: “In the context of an exceptional year last year where we saw record consumer buying and investor sell-offs, this quarter’s demand continues to demonstrate a return to long-term trends, illustrating the uniquely balanced nature of the gold market.
"Jewellery consumers continued to digest the exceptional purchases of 2013 and investors also rebalanced, pulling back from the extremes we saw last year. Overall the gold market is stabilising following the extraordinary conditions we saw in 2013.”
UK Gold Demand for Jewellery in Q2
According to today’s WGC report, the UK was one of the more positive markets for gold in Q2, with demand rising 21% to four tonnes. The WGC said UK consumer confidence has continued to grow in line with the economy, with sales bolstered by yellow gold coming back into fashion.
In physical terms, UK gold demand reach 3.6 tonnes in Q2, up from 3 tonnes in Q2 2013. In value terms, UK gold demand climbed 10% year-on-year, reaching US$149 million (£89m).
The WGC also notes that UK hallmarking statistics show growth across all carat segments for gold, which has been helped by a stronger currency keeping the sterling price down.
With a view to the first six months of the year, UK gold demand for jewellery is 25% ahead of the same period last year, albeit that absolute volumes remain very low.
Global Gold Demand in Q2
In terms of global gold demand for jewellery, the year-on-year decline of 30% recorded in Q2 "was predictably dramatic", according to the WGC, given the high levels of demand recorded in Q2 2013.
The total value of gold demand for the jewellery sector reached US$21.1 billion (£12.6bn) in Q2 2014, down 36% compared to the value of global gold demand in Q2 2013.
In the US, gold demand for jewellery demand grew for the fifth consecutive quarter. The WGC says the US market continues to absorb higher imports of gold jewellery, notably from India, China and Italy, the strength of which indicates growing confidence across the domestic supply chain, aided by higher margins.
Promotions such as the ‘May is Gold Month’ in the US initiative generated a good response among consumers, who continue to feel the benefits of an improving domestic economy.
The WGC has described 2014 as "potentially a pivotal year" for the gold supply chain. In line with its prediction in the previous Gold Demand Trends report in Q1, mine production posted another increase in the second quarter. Year-to-date, mine production has delivered an additional 58.2 tonnes of gold to the market vs H1 2013.
The WGC says it anticipates this rate of growth will slow in coming quarters as the supplies thin and mining companies facet limited opportunities to impose further cost cutting measures.
It believed mine supply may have already reached a high, meaning a plateau over the course of the next four to six quarters as a result.
In the year-to-date, recycling activity has generated supply of 578.3 tonnes – the lowest first half total since 2007. The environment of stable gold prices has discouraged consumers from selling their gold holdings. Recycling by consumers in industrialised markets contracted modestly, but appears to have reached a floor.