The World Gold Council reports that global central bank gold acquisitions set a new historical record for the first half of this year.
On August 1, the World Gold Council released its latest "Global Gold Demand Trends Report." The report shows that due to the record-setting gold acquisitions by global central banks in the first half of the year, coupled with the continuous increase in global gold investment and jewelry consumption, the global gold market has strong momentum.
According to the report, gold demand in the second quarter (excluding over-the-counter trades) was 921 tons, a slight decrease of 2% year on year. However, the total gold demand, including over-the-counter trades, grew by 7% year on year, indicating that the global gold market remains robust. The total global gold demand (excluding over-the-counter trades) for the first half of the year was 2062 tons, down by 6% year on year. Meanwhile, the total gold demand for the first half of the year, including over-the-counter trades, reached 2460 tons, up 5% year on year.
In terms of gold acquisitions, second-quarter central bank gold demand decreased to 103 tons compared to the same period last year, mainly due to the Central Bank of Turkey's large-scale gold sales. Despite this, global central bank gold demand still reached a record 387 tons in the first half of the year. The second quarter's demand also showed a positive trend, indicating that official gold acquisitions are likely to remain strong throughout 2023.
Regarding global gold investment, key markets such as the United States and Turkey saw growth, with gold bar and coin demand reaching 277 tons in the second quarter, up 6% year on year. The total demand for gold bars and coins in the first half of the year reached 582 tons. Global gold ETF outflows were 21 tons in the second quarter, significantly lower than the 47 tons in the same period in 2022. The cumulative net outflow for the first half of the year was 50 tons.
Focusing on the Chinese market, there was a significant decrease in domestic gold jewelry demand and gold investment demand in the second quarter. However, due to the low base effect from last year, the domestic gold jewelry demand in China still grew by 28% year on year to 132 tons in the second quarter of 2023.
According to the World Gold Council's analysis, compared to the lower base last year, domestic gold jewelry demand in China bounced back in the second quarter of 2023. However, due to seasonal factors and the rise in domestic gold prices, the demand for gold jewelry decreased quarter-on-quarter in the second quarter. But overall, domestic gold jewelry demand in the first half of the year increased by 17% year on year to 328 tons.
The World Gold Council also stated that China's domestic gold jewelry demand has not yet returned to the average level of 2021 or the past decade. This is mainly due to record-high gold prices affecting jewelry demand and increased consumer spending on travel and other forms of entertainment competing for jewelry consumption space.
Data from the World Gold Council shows that the Chinese market again saw gold ETF outflows in the second quarter, with the scale of assets under management (AUM) falling to RMB 22 billion (50.2 tons). The total outflows in the first half of the year amounted to about RMB 521 million, equivalent to a reduction in holdings of 1.3 tons.
The World Gold Council suggested that a 2% increase in gold prices, which may have triggered investors to take profits, could have driven the outflows from gold ETFs this quarter. However, the magnitude was limited, as the need for gold as a hedge and the excellent performance of RMB gold prices still encouraged most investors to hold onto their gold ETF shares.
Additionally, in terms of central bank gold acquisitions, China's official gold reserves increased for the eighth consecutive month in June. As of the end of June, China's official gold reserves stood at 2113 tons, an increase of 45 tons for the second quarter. In the first half of the year, the People's Bank of China reported a total of 103 tons in gold acquisitions, with a total increase of 165 tons over the most recent eight-month period.
Looking forward, Wang Lixin, CEO of the World Gold Council China, indicated that seasonal factors suggest that gold demand may rebound after the second quarter. Given the low base in 2022, the annual year-on-year growth in 2023 is expected to reach double digits. In terms of gold jewelry, various consumer stimulus policies may help to boost jewelry demand, but the high domestic gold prices could potentially hinder this growth. In terms of gold investment, market risk aversion could provide a boost to retail gold investment.
