Gold Investment Demand And India, China Demand Down; Central Bank Demand Doubles

Tyler Durden's picture

From GoldCore

Gold Investment Demand and India, China Demand Down; Central Bank Demand Doubles

Today's AM fix was USD 1,603.50, EUR 1,306.74, and GBP 1,021.34 per ounce.
Yesterday’s AM fix was USD 1,594.75, EUR 1,293.60 and GBP 1,016.74 per ounce.

Silver is trading at $27.91/oz, €22.81/oz and £17.85/oz. Platinum is trading at $1,401.00/oz, palladium at $574.40/oz and rhodium at $1,075/oz.

Gold rose $4.50 or 0.28% in New York yesterday and closed at $1,604.10/oz. Silver edged off and recovered to a high of $27.99 and finished with a gain of 0.07%.

Gold is floating in a tight range at $1,600/oz today and gold continues consolidating at this level. 

The macroeconomic backdrop remains highly supportive with the Eurozone debt crisis far from resolved and the risk of debt crisis in Japan, the UK, India, China and the U.S. in the coming months.

US data reported yesterday clouded any certainty over the US need for imminent quantitative easing.  However it is certain that the hawks and doves will have much to discuss at the upcoming Jackson Hole Economic Policy Symposium at the end of the month.

The World Gold Council released its quarterly report today, Q2 2012 Gold Demand Trends Report and can be read in full on the World Gold Council website here.

Accumulation of gold bullion from central banks was the bright spot in demand last quarter, as total demand fell 7% globally, which was driven by a 38% fall in consumer demand from India. 

Price sensitive Indians have been shunning gold and many have been opting for far cheaper poor man’s gold – silver.

Jewellery and investment demand both fell. Jewellery consumption was down 72.3 tonnes at 418.3 tonnes, while investment fell 88.3 tonnes to 302 tonnes.

The report shows how while record levels of demand from western markets, China and particularly India have been followed by a decline – the seismic shift that is central banks going from being bet sellers to net buyers has provided a new fundamental pillar of support for the gold market.   

Physical demand slowed down in western markets and especially in India in recent months but large buyers continue to accumulate - both hedge funds and central banks and this is providing fundamental support to gold above the $1500 to $1,600/oz level.

2Q total central bank gold purchases were double the level reported a year ago as emerging market sovereign nations sought to diversify away from the dollar and euro and heightened economic insecurity.

Gold purchases among central banks hit its highest quarterly levels (157.5 metric tons) since the sector became a net buyer of the yellow metal in 2Q 2009. 

The official sector which comprises central banks and other official institutions had by comparison bought 66.2 tons in 2Q 2011.

If central banks continued to purchase gold at the current rate the official sector gold take would total nearly 500 tons this year, topping the 458 tons purchased in 2011 by the sector. 

Cross Currency Table – (Bloomberg)

Central banks have become net buyers of the yellow metal increasing their reserves as a hedge against the sovereign debt crises affecting the euro and dollar. Prior to 2009, central banks had been net sellers of gold bullion for nearly 20 years.

Central banks of Russia, Saudi Arabia, Mexico, Turkey, Kazakhstan, Thailand, Ukraine and the Philippines have been recently active buyers of gold.

Kazakhstan's central bank purchased gold for its 7th month in a row this June, rapidly growing its reserves which are now 1 million troy ounces higher than last year, according to International Monetary Fund data.  

There is the potential of greater demand from unreported purchases by the People's Bank of China - should they decide to again report an increase in their gold holdings.

The global banking, financial and monetary system is, to put it frankly, a mess and will take years to rectify - in the meantime gold looks set to continue gradually eking out safe haven gains.

Global gold demand is back at levels seen in 2009 which shows that the assertion that there is a gold bubble mania with ‘Joe and Jane public’, the investment and non investment world “piling into” gold is far from the case.

Gold Prices/Rates/Fixes /Volumes – (Bloomberg)

As a percentage of pension and investment portfolios and of central bank currency reserves gold allocations remain miniscule from a historical basis and miniscule when compared to allocations to more risky equities and bonds.

This suggests that the gradual increase in demand and then slight decline in demand since Q3 2011 is nothing more than then ebb and flow and is sustainable.  There is a possibility that the gradual increase in demand in the coming years could give way to a more substantial increase in demand in the future.

Given the appalling fiscal and monetary backdrop, demand for gold, particularly from investors and store of wealth buyers will likely increase significantly in the coming years – as gold gradually goes from a its status as a fringe investment back to being  a mainstream asset common in all investment portfolios and owned by the majority of investors and savers.

For breaking news and commentary on financial markets and gold, follow us on Twitter.

Gold holds above $1,600/oz as stimulus hopes persist - Reuters

Central Bank Gold Demand Doubles in 2Q – Fox Business

Low volumes, central bank wait-and-see depresses Europe stocks - Reuters

Crude At Three-Month High; Gold Declines - Bloomberg


Video: Gold Prices, Demand Seen to Increase in Second Half - Bloomberg

Video: Soros and Paulson on Track as Gold May Top $2,000 - Bloomberg

Eat Big Breakfasts Without Cashing Out On Gold – The Financial Times

41 Years After The Death Of The Gold Standard - "How We Ended Up In This Economic Purgatory" – Zero Hedge

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Cognitive Dissonance's picture

" total demand fell 7% globally, which was driven by a 38% fall in consumer demand from India."

I find this hard to believe. But of course the World Gold Council would never lie.

I wonder how much Gold is moving in the shadow markets and thus not officially counted?


Mikehy's picture

forgive my ignorance, but why would the world gold council lie about that? Are they not a industry group that wants the price to rise higher?

not knocking you, just curious.

HardAssets's picture

Yep - - all one can do is study the fundamentals and stack on a regular basis. Who can believe anything reported by any of them.

Stuck on Zero's picture

Central Banks were selling furiously when gold was cheap.  Now they are buying furiously when gold is expensive.  Shouldn't we do the opposite of what the foolish banks are doing?


vast-dom's picture

I guess China never Imported More Gold In Six Months Than Portugal's Entire Gold Reserve. I must be hallucinating again. Gold under 2k/oz and Silver under 45/oz proves that we gaze at the centrally shuffled shell game.

youngman's picture

China´s purchases are all in the shadow is Russia....Iwould say if you are a buyer..why would you want the price to go up by telling everyone you are a buyer????

When the time comes...they will tell us how much they have...AND what they are going to do with a new reserve currency...


I and silver are very quiet....I am still buying as I see the western world on a downward path of no return...will it be Japan...the USA..or the EU ....who will fail first....and start the dominos falling


The Axe's picture

Paulson is doing his job of providing support....that ..fact    should worry  "short term" bulls...

dexter bland's picture

Its ironic isn't it, goldbugs being bailed out by central banks? And lets not forget when central banks were net sellers - at the bottom of the market, they are not known for market timing. Demand is down everywhere else, in every sector and region. Its too expensive for its traditional uses and lost the momentum it needs to be useful as an investment. It has no yield so its a store of value only when it happens to be rising in price...which it isn't currently.

buzzsaw99's picture

yep, the goldbugs can thank god for the central bankers artificially propping up prices into bubble territory. ironic.

jimmyjames's picture

yep, the goldbugs can thank god for the central bankers artificially propping up prices into bubble territory. ironic.


You and your always unsubstantiated no proof-one liner bullshit-

Point out the bubble characteristics

When you and the rest of your clueless assbackward cohorts here start buying-I will know we're going into a bubble-

FranSix's picture

It shouldn't escape anyone's notice that the banking sector has been stocking up on gold bullion since very early on in the bull market through ETFs.  The latest IPO that I've heard of was the MNT.TO, though you probably are seeing more ETFs spring up in the Asia Pacific.

youngman's picture

Actually I see it as third world central banks stocking up...getting out of the fiat.....and watching the crash from the sidelines...

john_connor's picture

If foreign central banks are using dollar reserves to buy gold, would this mean that said dollars would not repatriate their way back to the US?  Or would the dollars end up back here anyway with the gold purchase being another step in the process? 

apberusdisvet's picture

Both the Silver Institute and the World Gold Council are bankster infiltrated; nothing they say can be taken as fact.  Better to understand the reasons why peak gold and silver will be reached in 20 years or less.  Hint:  it has a lot to do with peak oil and the drastically declining grades of ore actually mined.  

Then there's the question of how much of gold and silver actually mined will ever reach the free (?) market.  As the global economy implodes, are any mining countries going to allow exports of the only true wealth at their disposal?

giovanni_f's picture

Reuters and Bloomberg. Ever read an unbiased article on gold (or anything else for that matter) from these mind control factories? Gold demand ebbs (purportedly): Rationality takes hold. Gold price rises: Fear-induced flight into a barbaric relic by doomsday preppers. Followed by a "gold mining kills children" sort of write up on the cynicism of investors that have no qualms with thriving on others misery.

Totentänzerlied's picture

Asset grab, bitchez. Aaaaaand it's gone.

bharat's picture

Here in India, the business environment looks highly deflationary. This is due to the large and unsustainable amount of debt taken on by many businesses (both large and small). This is having a huge negative impact on the banks as well. I believe there is a downward demand trend in India, which will accelerate in the next few months. Whether that translates into lower gold prices going forward, I don't know.


FWIW, I sold most of my gold.