Research library

Q2 gold demand flat, H1 down 10%

Strong consumer demand recovery and Q2 gold ETF inflows were not enough to offset heavy Q1 outflows.

This paper looks at the vulnerabilities specific to central bank balance sheets and discusses how gold holdings can mitigate the risks posed. In particular, it focuses on the way gold holdings can affect the revaluation reserves that form part of central bank equity.

Inflation fears and momentum ignite gold

Gold registered healthy positive returns for the second consecutive month, erasing the losses accumulated during Q1. Gold ended May at US$1,899.95/oz – its highest level since January and back above its 200-day moving average – representing a 7.5% m-o-m increase.

Inflation, falling yields and the US dollar pushed gold higher

Marking a turnaround from the first three months of the year, gold rebounded 4.5% in April to finish the month at US$1,768/oz - its highest monthly closing level since January and its first positive monthly return since December 2020.

Strengthening consumer demand mitigated the impact of ETF outflows as global economies continued to recover

A sharp rise in US interest rates and a stronger dollar have weighed on gold recently. But a rebound in economic activity and a lower gold price have provided opportunities for consumers and strategic investors alike.

Weak Q4 set the seal on an 11-year low for annual 2020 gold demand

The COVID-19 pandemic raised uncertainty by both compounding existing risks while creating new ones. But by the end of last year, investors were optimistic that the worst was over. 

Strong growth in global investment demand for gold in Q3 partly offset weakness elsewhere as COVID-19 remained in the driving seat.

In this paper, we seek to answer those questions by assessing how gold lease rates have been affected in the past through changes in the demand to borrow gold and the supply of gold available for lending.