China and India continue to pace buying to near-record levels.
Gold saw demand soar to its second-highest quarterly level in the second quarter, as China and India led purchases totaling $45.5 billion for the three months, according to the World Gold Council.
The Gold Demand Trends report for Q2 2011 showed gold hit $1,552.50 per oz and averaged $1,506.10 during the quarter — a 26 percent increase year-on-year and 19 percent up from the first quarter of 2011. These high prices boosted the dollar-demand numbers for gold to its second-highest quarter in history — $44.5 billion, right behind Q4 2010.
For gold bulls, the good news is that this demand spike came from the usual suspects, not unknown new entrants. Once again, the countries to watch are India and China, which not only account for 55 percent of jewelry demand and 52 percent of bar and coin demand this time around, but are also are the fastest-growing markets. The global growth rate for gold demand was 7 percent between Q2 2010 and Q2 2011 — but India saw a 38 percent growth rate year-on-year and China clocked in at 25 percent.
Let’s take a look at demand sector by sector to see how it breaks down.
Forty-six percent of total global gold demand was in the form of gold jewelry and the sector saw demand rise 6 percent year-on-year to 442.5 tonnes. Only five areas — India, China, Hong Kong, Turkey and Vietnam — showed increases in demand year-on-year.
India cornered a full 32 percent of global jewelry demand, up 17 percent year-on-year — though the WGC notes that the second quarter of 2010 had weak historical jewelry demand. However, the WGC noted increased Indian buying that began around the Akshaya Tritiya festival in May and that continued beyond the festival buying, suggesting the country’s appetite for gold jewelry is high even apart from the expected seasonal holidays and festivals.
China usually has a quiet second quarters too, but the country accounted for 102.9 tonnes of gold jewelry — 16 percent more than this time last year. On a dollar basis, the value of gold jewelry consumed in the second quarter rose 40 percent compared with Q2 2010. Given that the Chinese economy is doing comparatively well, increasing prosperity seems to be driving jewelry demand.
Hong Kong, which the WGC treats as separate from the rest of China, saw jewelry gold demand rise 38 percent in physical terms, to 6.8 tonnes, primarily from mainland tourists taking advantage of different designs available in Hong Kong, along with tax advantages on purchases.
In Vietnam, gold jewelry demand was primarily fueled by rumors that gold bar production and sale would be banned, resulting in a 6 percent increase to 3.3 tonnes.
Elsewhere around the world, gold jewelry demand was down.