Demand for coins and gold bullion fell into a gloomy environment for investment in gold. Orobel present today an overview of the state of global demand for gold investment, ie coins and gold bars !
Total demand of gold coins and bullions
2nd quarter 2014
2nd quarter 2015
Variation /previous year
Variation /beginning 2015
↓ -13 %
↓ -30 %
Total demand in the investment gold sector fell by 11% compared to last year – from 199.9 tons to 178.5 tons. The three factors that cause it are:
No clear trend for gold price.
Inflows into risky assets, particularly equities sides traded.
The prediction of US interest rates, with possibilities of increase in September.
Demand for gold coins and bullion decreased by 15% compared to last year. In contrast, ETF positions outflows were smaller than the second quarter of 2014 – less than 23 t. The impact on the market was very limited this quarter. ETF flows were nil in the first half of this year (compared with outflows of 51.6 t in H1 2014, an increase of 612.1 t in H1 2013), while demand for coins and bullion was down 13% from 519.3 tons to 413.5 tons.
The first weeks of the third quarter saw dramatic movements in the gold price. The ETF outflows increased since the end of June, but the pace of such flows remains below the levels observed in the previous two years.
The « Grexit » has revived the european investment
The concern about the debt crisis in Greece and its possible exit from the euro zone were the size of factors. The increase in demand was concentrated in German-speaking markets, with many increases coming in June as investors reacted quickly to the announcement of the referendum in Greece. Investors focused primarily on gold coins and bars on small cuts (one ounce, and 50g-250g), indicating that demand in this segment was driven by retail small investors.
In France, demand for gold investment was slightly negative in Q2. The decrease was partially a response to stricter legislation after the government has lowered the threshold for payments in anonymous cash.
Increase of American Eagle demand
Demand for coins and gold bars among US investors had a low starting in Q2 2015. Sales of gold bullion from the American Royal Mint has accelerated in June (US Mint) having peaked 17 months. This trend is continued in July, demand for American Eagle gold reaching a peak for 2 years to 170,000 ounces due to lower gold prices.
By observing the historical trends in US demand for coins and bullion, it had reached 49 tonnes in the last quarter. In Q2 2009, the request had reached the peak of 119.8 t, at the height of the global financial crisis. It is unlikely that the demand reaches new levels as in 2008-9, due to the absence of any systemic risk event, although this demand is likely to remain at historically high levels.
Chinese demand for gold coins and billions globally stable – a 6 % rise
Purchases of gold bars and gold coins in China have been sidelined for much of the second quarter for investment in stock market. The increase of 6% over the period is largely a reflection of weak demand in Q2 2014, although price expectations have also played their role – the lack of direction in gold prices has made investors uncertain as to the likely future trend.
Demand for gold bars and gold coins has rebounded towards the end of the quarter, in response to the sharp fall in Chinese equities in the second half of June.
Investment demand for gold in India has contracted for a third consecutive quarter, down from 30% to 36.5 tonnes, a new low for 6 years to six years. Uncertainties about the evolution of gold prices were a factor, as the great performance of the Indian stock market, which continued to attract the attention of investors. The weakness of the rural economy also played a role. Rural investors most affected by the rains Q1 were more likely to sell gold to supplement declining incomes that make fresh purchases.
The lack of demand was such that exceptionally India exported a small quantity of gold bullion in the quarter, about 10-15 t (graph below).
Weakness of investments in East-Asia.
The East Asia represent everything down 6.1 tons of aggregate demand in coins and gold bullion. Uncertainty about the future direction of gold prices was a general theme in the region. The 12% decline of Vietnamese Investment also has a function of very high premiums on tael gold bars, which hovered around US $ 100-150 / oz in the international price of gold. In Japan, activity picked up both purchases on the sale, but the net impact was broadly neutral with just a drop of 0.2 tons.
Turkish investors abstain, waiting for a better opportunity to buy at lower prices.