August 1, 2019 / 4:01 AM / 6 months ago

Gold demand leaps to 3-year high as prices surge - WGC

    By Peter Hobson
    LONDON, Aug 1 (Reuters) - Global gold demand rose 8% in the
first half of this year to the highest since 2016, driven by
central bank buying and a flood of investment into gold-backed
exchange traded funds (ETFs), the World Gold Council said on
    Retail investors however were put off buying bars and coins
by a rapidly rising gold price, the WGC said in its latest Gold
Demand Trends report. 
    The price rally to six-year highs above $1,400 an ounce in
June also saw gold holders cash in metal for profit, causing a
boom in recycling that raised global supply by 6%, the WGC said.
    The world's appetite for gold was 2,182 tonnes over
January-June, up from 2,021 tonnes in the same period of 2018,
according to the WGC. 
    In the second quarter, demand was 1,123 tonnes, compared to
1,039 over April to June 2018. 
    "We believe the factors underpinning ETF inflows and central
bank buying, including looser monetary policy and geopolitical
uncertainty, will continue," the WGC's head of market
intelligence Alistair Hewitt said. 
    "Consumer demand, however, may be a bit soft as people adapt
to the higher price level," he added.  
    Gold is traditionally seen as a safe investment in uncertain
times. Looser monetary policy drags down bond yields, making
non-yielding gold more attractive. 
    The WGC said central banks bought 224.4 tonnes of gold in
the second quarter, taking their purchases to 374 tonnes over
the first half. That was up from 238 tonnes in 2018, and the
most for any first half since at least 2000. 
    Holdings of gold in ETFs rose by 67.2 tonnes over April-June
and 107.5 tonnes in the first half to a six-year high of 2,548
tonnes, the WGC said. 
    But purchases of bars and coins fell 12% in April-June to
218.6 tonnes as Chinese demand slumped, taking the first-half
total to 477 tonnes, the lowest in a decade. 
    Jewellery demand rose 2% to 531.7 tonnes in the second
quarter, supported by a 12% rise in India. Total demand in the
first half was 1,062 tonnes, the WGC said.  
    Hewitt forecast full-year consumption of gold in China at
900-1,000 tonnes and in India at 750-850 tonnes. Central banks
will likely buy 500-600 tonnes in 2019, though this forecast
could be exceeded, he said. 
    Supply of gold expanded 6% in the second quarter to 1,186.7
tonnes thanks to higher mine production and a 9% increase in
recycling to 314.6 tonnes.
    That brought first-half supply to 2,324 tonnes, the highest
since 2016, according to the WGC. 
    GOLD DEMAND (T)*    
                           Q2 2019   Q2 2018    % change
 Jewellery                    531.7      520.8        2%
 Technology                    81.1       83.3       -3%
 Investment                   285.8      282.0        1%
  - Bar and coin              218.6      248.2      -12%
  - ETFs and similar           67.2       33.8       99%
 Central banks                224.4      152.8       47%
 TOTAL                      1,123.0    1,038.8        8%
    * World Gold Council, Gold Demand Trends Q2 2019

 (Reporting by Peter Hobson; Editing by Jan Harvey)
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