Gold demand declined 7.1% in Q-2, Jewelry use slowed, Central Banks buying

Gold demand fell 7.1% in Q-2 as investment slid and Asian jewelry purchases declined amid higher local prices and concern about economic growth, the World Gold Council said.

Global demand dropped to 990 metric tons in the Quarter compared with 1,065.8 tons a year earlier, as investment fell 23% and jewelry fell 15%, the London-based industry group said Thursday in a report.

Jewelry consumption should pick up in Asia during 2-H this year on seasonal wedding and festival purchases and as economic growth improves, it said.

Gold fell 4.3% in London in Q-2 as commodities fell the most since Y 2008 and investors favored the the USD on mounting concern about Europe's debt crisis and global expansion.

Investors are still holding a near-record amount in Gold-backed exchange-traded products and central banks will buy close to 500 tons this year after adding the most to reserves since becoming net buyers in Y 2009, the council said.

Gold for immediate delivery traded at 1,603 oz at 3:33 p Wednesday in London, + 2.5% this year.

Prices averaged 1,611.88 in Q-2, + 6.8% from a year earlier and 4.7% lower than Q-1.
World investment, including Gold bars, coins and exchange traded products fell to 302 tons in the 3 months through 30 June, the council said.

Coin and bar demand accounted for the bulk of investment, with ETP holdings little changed, the report showed. European bar and coin demand rose 15% to 77.6 tons, the data show.

Nations from Russia to Ukraine to Kazakhstan added to their Gold holdings this year.

Central banks bought 157.5 tons in the Quarter, compared with 66.2 tons a year earlier, the council said. That took 1-H additions to 254.2 tons.

Total Indian demand was 181.3 tons in the latest Quarter, 25% more than China's, the biggest buyer the previous 2 Quarters.

The council reiterated its prediction that China will become the top consumer this year on an annual basis, with demand reaching almost 850 tons vs about 700 tons for India.

Mine output rose 0.4% to 706.4 tons in Q-2 from a year earlier, the council said. Scrap supply declined 12% to 363.7 tons in the period, the lowest level since Q-1 last year.

Jewelry use fell to 418.3 tons in Q-2 from 490.6 tons a year earlier, the council said. Jewelry demand from India, Y 2011's biggest buyer, dove 30% to 124.8 tons, accounting for 30% of the global total.

A weaker Rupee vs the USD meant that average local Q-2 bullion prices in India were 29% higher than a year earlier, data show. Indian jewelers held a strike in March and April to protest government taxes on imports.

Paul A. Ebeling, Jnr.

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.