Gold Demand Trends Q2 2019

1 August, 2019


Total investment 1% firmer y-o-y, as healthy ETF inflows counterbalanced a 12% drop in bar and coin demand.

  • Holdings in global gold-backed ETFs grew by 67.2t in Q2, to reach 2,548t
  • UK-listed ETFs attracted the greatest inflows in Q2, due to Brexit concerns and currency weakness
  • Profit-taking erupted in June as the gold price reached key levels, driving bar and coin investment down to a decade low.
Tonnes Q2'18 Q2'19   YoY
Investment 282.0 285.8 1%
Bar & coin 248.2 218.6 -12%
  India 39.3 44.5 13%
  China 69.5 49.5 -29%
Gold-backed ETFs 33.8 67.2 99%


Investors added 67.2t to their holdings of gold-backed ETFs in Q2, taking total holdings to a six-year high of 2,548t. Strong inflows in June (+126.7t) outweighed April’s sizable outflows (-57.2t). 

In terms of US dollar value, AUM in the sector grew to US$115.4bn – the highest since April 2013 – on a combination of net inflows and a higher gold price. Net inflows throughout H1 reached 107.5t, compared with 60.9t in H1 2018. 

Geopolitical uncertainty, dovish monetary policy commentary by central banks, and a rising gold price were among the key factors that drove investors to increase their holdings. 

European-listed products have absorbed the bulk of the inflows so far in 2019. Holdings of gold-backed ETFs in Europe grew by 87.2t over the first half-year, with 67.2t of that growth occurring in Q2. 

UK-listed funds led the way in Q2: around 75% of all global inflows during the quarter were directed towards these products. Investors sought the safe haven of gold amid the uncertainty surrounding Brexit and the leadership battle that followed Theresa May’s resignation as Prime Minister. The sharp drop in the value of the pound also fuelled inflows during the quarter as the UK’s growth prospects were cut following repeated failures in Brexit negotiations.  

German-based funds also saw decent inflows: the US-China trade war weighed heavily on investors’ minds as they sought the relative safety of gold. The German auto sector is vulnerable to continued global trade uncertainty, as highlighted by recent profit warnings rom car maker Daimler AG and supplier to the auto sector, BASF. Anecdotal evidence suggests that this vulnerability was a factor driving inflows into gold-backed ETFs.

And gold investors had the added incentive of very low rates: the yield on 10-year German government bonds reached historic lows of -0.33% in June. Such record lows enhanced gold’s investment appeal: holdings in UK- and German-listed funds increased by 11% (to a record 554.1t) and 2% (to 338.5t), respectively, in Q2. 

US funds grew by a modest 4.8t in Q2, as hefty inflows in June reversed prior outflows. Combined outflows of 60.2t in April and May gave way to strong growth in June, when North American funds added 65t. The 9% rise in the US dollar gold price during the month likely attracted momentum investors, as seen by strong inflows into the most liquid funds. Overall, North American inflows were supported by continued tension between the US and various trade partners, as well as expectations of lower interest rates, as the Federal Reserve signalled a more dovish stance – with up to three rate cuts now being priced in throughout the remainder of 2019.1

Elsewhere, gold-backed ETFs saw another quarter of very modest outflows. Asian-listed funds lost 4.1t; much of this was due to a 5.4t outflow from China’s Huaan Yifu fund. Total H1 outflows of 9t from Chinese funds have – we believe – been a function of profit taking and a shift to riskier assets in the region. Gold-backed ETFs in other regions lost 0.5t.2 This segment remains small, with aggregate holdings of just 31t.

Bar and coin

The retail investment market was relatively soft in Q2 2019. It experienced its third consecutive q-o-q decline and demand fell 12% y-o-y to 218.6t; China accounted for around two-thirds of the drop. Global H1 demand of 476.9t was at its lowest level since 2009. 


H1 bar and coin demand fall to its lowest level since 2009 due to profit-taking

H1 bar and coin demand fall to its lowest level since 2009 due to profit-taking

Sources: Metals Focus, Refinitiv GFMS, World Gold Council; Disclaimer


After a steady start to the quarter, retail investment stalled in June as the gold price rallied. Some investors sold a portion of their investments to realise profits, while others sat on the side-lines in the belief that the rally would be short-lived and that they could enter the market at a lower price. 

Gold market giants diverged in the second quarter. In China, Q2 bar and coin demand fell to 49.5t, its lowest level since Q3 2016, as investor worries faded and the gold price rallied. Currency concerns – which have supported gold investment over the past 18 months – eased in May as Pan Gongsheng, Vice-Governor of the People’s Bank of China, pledged to keep the exchange rate stable. And in June the local gold price rose sharply to a six-and-a-half year high of 322yuan/g. Having witnessed the Chinese Damas’ rush to gold in 2013, and their subsequent losses, Chinese investors decided to sit back and wait for a less volatile price environment. These factors combined to depress fresh purchases and boost investor sales.

In contrast to the soft retail investment demand, speculative trading activity on the Shanghai Gold Exchange shot through the roof. In June, trading volumes of the Au(T+D) margin-traded gold contract hit 2,062t, the second highest level on record.    

India, on the other hand, was one of the few bright spots this quarter. Bar and coin demand rose 13% y-o-y to reach 44.5t in Q2, a five-year high for second quarter demand. Akshaya Tritiya, the annual Hindu and Jain festival, supported demand in May, with the volume of gold sold soaring some 20-25% y-o-y during the festival. Industry contacts estimated that gold investment products accounted for around 60% of these sales. Investor liquidations were limited despite the sharp rise in the rupee gold price, which finished the quarter at Rs34,006/10g, close to the record high of Rs34,500/10g set in August 2013, as investors felt the rally had further to run.  

Demand in the Middle East was down 27% to 15.7t, largely due to a drop in Iranian demand, which fell 31% y-o-y. This was the first y-o-y decline in Iranian bar and coin demand since 2016. The weak rial and the eye-wateringly high local gold price, which averaged IRR6,050,110/g in May, pushed gold out of reach for many investors and encouraged others to take profits. 

Retail investment in Turkey fell 15% y-o-y to 9.9t. The local gold price was elevated throughout the quarter and hit a record high of TRY 263,893/g on 25 June, prompting some investors to take profits on a portion of their gold holdings. 

In East Asia, demand in Thailand dropped to 12.9t, its lowest quarterly level since Q4 2010. This partly reflects a shift away from physical gold to a FX-hedged cash-settled contract traded on the Thai Stock Exchange. This contract was launched in Q4 2018 and has proved increasingly popular with Thailand’s gold traders.   

In Vietnam, retail investment was steady at 9t. The rally in the US dollar gold price drew out some sales – pushing the Vietnamese wholesale gold market to a discount against the global spot price – and gave rise to unofficial flows out of the country.   

Retail demand in the US remained weak. Q2 demand was just 3t, taking H1 demand to 9.8t – the lowest level since 2007.  Q2 bullion coin sales from the US Mint fell to 19,000oz, the lowest level since Q3 2006. This market has been struggling for some time, with many traditional gold investors focused on America’s healthy economic growth, low unemployment, and continued wage growth. The gold price rally in June triggered selling by some investors, and coin premiums in the secondary market fell to their lowest level since before the global financial crisis, spurring gold exports from the US to Germany.


Buoyant US economy has hit US Eagle bullion coin sales hard

Buoyant US economy has hit US Eagle sales hard

Sources: Bloomberg, US Mint, World Gold Council; Disclaimer

Note: chart shows the total volume of gold sold (includes one ounce, half ounce, quarter ounce and tenth ounce Eagle coins).


Although the scale of retail disinvestment in response to the price rally was less pronounced in Europe, demand was weak nonetheless. At 32.4t in Q2, it stood at its lowest level since 2008. And while German demand was marginally firmer (up 1% y-o-y) the increase is in comparison to a low base (Q2 2018 was the third lowest quarter since 2010). Despite this weakness, it appears that television marketing campaigns have fuelled the appetite for small gold bars (between 1g-3g) amongst the mass retail market. 


  1. As of 29 July 2019
  2. The ‘other’ category of gold-backed ETFs includes fund listed in Australia, South Africa and Turkey.

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