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Global demand for gold will decline in the first half of 2020, even as ETF inflows hit a record high

Global gold demand declined overall in the second quarter and first half of this year, but gold investment demand rose to a record high as the number of exchange-traded funds reached a record high in late June. from the World Gold Council published Thursday.

Total global demand for gold, including the metal for use in investments, jewelery, technology and central bank purchases, declined 11% year-on-year in the second quarter to 1,015.7 tonnes, representing demand for the first half of the year. pulled. year decreased by 6% to 2,076 tons.

The COVID-19 pandemic was the main impact on the gold market in the second quarter, “severely limiting consumer demand while providing support for investment,” the report said.

In the first six months of this year, total investment demand for gold, including ETFs and gold-backed bars and coins, reached a record high of 1,130.7 tons, with a record value of $ 60 billion.

“The global response to the pandemic by central banks and governments, in the form of interest rate cuts and massive liquidity injections,” brought record flows of 734 tons in gold-backed ETFs for the first half of the year to a new all-time high of 3,621 tons, the report. Inflows helped gold prices rise 17% in US dollars for the period.

In contrast, bar and coin investments fell to the lowest in 11 years in the first six months of the year, down 17% year-on-year to 396.7 tons. “Many countries remained under lockdown restrictions in Q2,” said the World Gold Council. “This took its toll on the demand for bars and coins, even as the gold price rose, consecutive eight-year highs hit in US dollars, and new records broke in many other currencies.”

Gold futures paid at $ 1,953.40 an ounce on Wednesday, the highest finish for a most active contract ever recorded.

The report found a difference in investor behavior between the East and the West, with a “profitable motive” dominating sentiment in the East, especially in Asia and the Middle East, but “safe haven buying and momentum investing” are central . in Western markets, such as Europe and North America, where demand for bars and coins experienced “substantial growth”.

However, demand for jewelry in the second quarter declined 53% year-over-year to a record quarterly level of 251 tons, causing demand to drop by 46% in the first half to 572 tons. Jewelry demand in China in the first half of the year declined 52% year-over-year to 152.2 tons, with the World Gold Council calling the “lasting impact of COVID-19 on consumer portfolios”.

“Consumers around the world felt the impact of market closure and the resulting economic slowdown,” the report said. China, which was the first market to come out of the lockdown, was the only market to recover from ‘extreme weakness in the first quarter’.

Also for the first half of 2020, the gold used in the technology fell by 13% to 139.9 tons. Meanwhile, net purchases by central banks amounted to 233 tons, down 39% year-on-year for the six-month period.

Meanwhile, total global gold reserves fell 6% to 2,192 tons in the first half of this year, reflecting “strict closings of the corona virus in key mining countries,” said the World Gold Council.