Global gold demand slowed to a six-year low in the second quarter of the year, and is set to fall further after China’s repeated devaluations of its currency, according to analysts.
Demand for gold fell by 12 per cent between April and June, as buyers demanded 914.9 tonnes of the precious metal, according to a quarterly report from the World Gold Council (WGC). That was driven by a 14 per cent fall in demand for jewellery, which is the single largest purchasing category for the metal.
In the UAE, demand for jewellery slid by 22 per cent, following reduced spending by tourists and Ramadan falling in June, according to the WGC.
Gold prices have slid to $1,116, down from about $1,300 earlier in the year. They are currently at an eight-week high, following a trough of about $1,090 last month – but analysts expect that slowing growth and currency moves in China could further dent the metal.
“The sentiment in gold … has been turning increasingly negative during the past month,” wrote Ole Hansen, the head of commodity strategy at Saxo Bank, in a research note. “No signs of inflation combined with rising bond yields, collapsing emerging market currencies, no safe-haven demand, a rising dollar, and rising expectations of an early US rate hike have all helped trigger an exodus out of gold.”
Analysts expect a further 2 per cent drop in global gold prices, as demand from China slows. The People’s Bank of China (PBoC), the country’s central bank, devalued the yuan by 3.5 per cent over the past few days. That pushes up the local price of gold in China, reducing consumer appetites for the metal.
This follows a PBoC announcement that it had added 604 tonnes of gold to its reserves in June this year.
“China has already become the world’s largest gold producer, and is also a big consumer of gold, with an ongoing policy of encouraging gold ownership by private individuals,” the PBoC said last week.
Slowing Chinese growth figures are also putting downward pressure on the demand for gold. While official data shows the country’s economy growing at 7 per cent, informal indicators paint a much less optimistic picture. Power generation, car sales, steel and cement output have all decreased considerably over the past year, suggesting a slowdown bigger than that described by official figures.
Analysts said that the financial woes of Greece and China had not led to an influx into gold, as often happens in times of turbulence.
“There are limited signs of safe-haven demand for gold,” wrote the Barclays commodities analyst Suki Cooper in a research note. “Since September 2014, gold has underperformed other haven assets, such as bunds and US Treasuries.”
abouyamourn@thenational.ae
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