Gold supported in Q2 despite softer central bank demand
Central bank buying slowed in Q2 but remained resolutely positive. This, combined with healthy investment and resilient jewellery demand, created a supportive environment for gold prices.
Q2 gold demand (excluding OTC) dropped slightly by 2% y/y to 921t, driven by a marked deceleration in net central bank buying compared to above average purchases in Q2’22. Inclusive of OTC and stock flows, total demand strengthened 7% y/y to 1,255t.1
Despite sales from Turkey in response to specific local market conditions, the 103t of net official sector purchasing in Q2 is in line with the underlying positive trend towards gold among central banks.
Jewellery consumption managed a modest improvement despite the high gold price environment, up 3% y/y at 476t. With jewellery fabrication of 491t, inventories increased by around 15t in Q2, in part as Chinese jewellery consumption failed to meet the trade’s optimistic expectations.
Bar and coin investment increased by 6% y/y to 277t in Q2, with Turkey a major driver of growth. And while ETFs saw net outflows of 21t (concentrated in June) these were notably smaller than the 47t outflow in Q2’22.
OTC investment jumped in Q2, reaching 335t. Although opaque, demand from this sector of the market was apparent as the gold price found firm support even in the face of ETF outflows and a reduction in COMEX net longs.
Demand for gold used in technology remained very soft thanks to continued weakness in consumer electronics; it held at just 70t for a second consecutive quarter.
Total gold supply was 7% higher y/y at 1,255t, lifted by growth in all segments. Mine production is estimated to have reached a record for H1 of 1,781t.