Gold demand declined slightly in the second quarter as central banks, led by Turkey, slowed down their purchases after a buying spree in the first quarter, which pushed gold prices to near record highs.
The demand for the bullion declined 2% to 921 tonnes in the three months to end-June year on year, the World Gold Council (WGC) said on Tuesday in its latest gold demand trends report. The 2% drop excludes the over-the-counter sales.
Gold and gold mining remains one of SA’s key foreign exchange sources even though the country has long lost its status as the world’s top gold producer due to the decline in its ore bodies over the years.
However, the sector still accounted for more than 90,000 people employed in 2022, according to industry body Minerals Council SA, which makes the gold demand report relevant.
The softening of demand during the review period came after the Central Bank of Turkey sold gold into the local market in response to tight conditions after a temporary partial ban on gold bullion imports, according to the report.
Apart from Turkey, Kazakhstan, Uzbekistan and Germany sold a combined 25 tonnes during the second quarter.
After a record-breaking start to the year, gold purchases by central banks totalled 103 tonnes in the April-June quarter, down 64% from the previous quarter, and a decline of 35% compared with the same period a year ago.
But this has done little to diminish the strong overall buying by central banks so far in 2023, with first-half demand sitting at 387 tonnes, the highest since 2000.
“Record central bank demand has dominated the gold market over the past year and, despite a slower pace in the second quarter, this trend underscores gold’s importance as a safe haven asset amid ongoing geopolitical tensions and challenging economic conditions around the world,” said Louise Street, senior markets analyst at the WGC.
“Looking ahead to the second half of 2023, an economic contraction could bring additional upside for gold, further reinforcing its safe-haven asset status.”
Turning to gold investment, bar and coin demand rose 6% to 277 tonnes on an annual basis.
Gold exchange traded funds (ETFs) outflows of 21 tonnes in the second quarter were notably smaller than the 47 tonnes in the same quarter of 2022, bringing net outflows to 50t in the first half of the year.
Jewellery consumption remained resilient in the face of high prices, showing a 3% year-on-year increase during the second quarter. A rebound in Chinese demand and strong consumer buying in Turkey bolstered second-quarter consumption.
Total gold supply was 7% higher year on year at 1,255 tonnes, with mine production estimated to have reached a record during the first half of 2023 at 1,781 tonnes.
Safe haven flows boosted the gold market earlier in the year after several US regional banks collapsed, triggering a sell-off in risk assets.
At the time, the market angst pushed the gold price just above the $2,000/oz mark, but it retreated after the US Federal Reserve moved swiftly to contain the fallout.
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