World Gold Council’s “Q2 Gold Demand Trends” report noted that while the Covid-19 pandemic severely curtailed consumer demand, it provided support for investment.
The total investment demand increased significantly by 98 per cent to 582.9 tonne during the quarter, compared to 295 tonne in the same quarter of 2019.
Within the investment category, while the demand for bars and coins declined by 32 per cent to 148.8 tonne during the April-June period compared to 218.9 tonne in Q2 of 2019, the electronic traded fund (ETFs) in gold and similar products surged by a whopping 300 per cent to 434.1 tonne against 76.1 tonne last year, the report said.
“Covid-19 created the perfect storm for gold investment as historic liquidity injections and record low interest rates significantly cut the cost of carrying gold. We witnessed a surge in gold price along with record inflows into gold-backed ETFs in the first half of the year,” WGC Market Intelligence Louise Street said.
On the contrary, consumer demand took a brutal hit from the pandemic in the first of 2020, Street added.
Global jewellery demand dropped to a record low for the second consecutive quarter, declining by 53 per cent during the quarter under review to 251.5 tonne compared to 529.6 tonne in the same period last year.
Gold demand in technology also witnessed a drop of 18 per cent to 66.6 tonne during April-June, compared to 80.7 tonne in the same period last year.
Similarly, Central Banks net purchases declined by 50 per cent year-on-year to 114.7 tonne during Q2 of 2020, compared with 231.7 tonne during April-June last year.
“The decline in gold demand during the second quarter is mainly driven by weakness in the consumer market primarily due to lockdowns in India and China. However, the impact on gold demand due to high prices can only be gauged only after things come back to normal and we see how the consumers react to the bullishness in the yellow metal,” WGC Managing Director, India, Somasundaram PR told over a telephonic conversation.
Meanwhile, the total supply during the quarter also dipped by 15 per cent year-on-year to 1,034.4 tonne.
The lockdowns implemented across Asia, Europe and North America severely disrupted the consumer-focused sectors of the market, with jewellery demand falling to unprecedented low Levels, Street noted.
Bars and coin investment slowed sharply, as a significant reduction in Asian demand masked the strong surge in Western investment, she opined.
“The consumer-focused sectors of the market will likely remain subdued for the next six months, but ongoing uncertainty and the threat of further waves of the pandemic mean that gold’s safe haven status will appeal to investors for the foreseeable future,” Street added.