Q2 saw a 5% y/y drop in global demand for gold bars and coins to 261t. This took the H1 total to 574t, fractionally lower compared to last year. There were, however, divergences within the sector in Q2: bar investment rose 12% y/y to 184t – the highest for a second quarter since 2013 – while demand for gold coins sank 38% to 53t – the lowest quarterly total since Q2 2020.
The difference can be explained by the slump in net demand in Western markets (where gold coins are more popular) contrasting with strong investment demand in markets across Asia.
It is important to note that, similar to last quarter, Western investors have continued to show strong interest in gold bars and coins, but this has been countered by equal – if not greater – selling interest as the price reached record levels, resulting in far lower net levels of demand.
Indian bar and coin investment in Q2 saw a repeat of the strong Q1, with demand of 43t (+46% y/y). Demand in H1 jumped 37% to 87t – the highest first half since 2014.
The auspicious Akshaya Tritiya festival in May boosted demand for gold investment products, as did bullish price expectations, with investors anticipating a resumption of the upward price trend following a period of correction/consolidation in late May and June.
Investment demand should remain supported as expectations are for further price rallies, with an added boost from the reduced import duty on gold. The healthy monsoon rainfall – so far – will further support demand through its positive effect on rural incomes. That outlook is tempered, however, by the likelihood of profit-taking – or at the least a notable lull in investment – should any gold price sharp rises materialise.
