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Global gold demand rises 8% in Q2 on central bank buying: WGC

Washington — Global gold demand rose nearly 8% in the second quarter of 2019 due to record-breaking purchases by central banks, the World Gold Council said Thursday.

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"Central bank buying and healthy [exchange-traded fund] inflows were the driving forces behind gold demand throughout the first half of 2019, the London-based trade group said in a report.

Overall gold demand in the second quarter totaled 1,123 mt compared with 1,038.8 mt in Q2 2018, according to the WGC.

Central banks bought 224.4 mt in Q2 compared with 152.8 mt in Q2 2018, taking total H1 demand from central banks to 374.1 mt, the largest net H1 increase in global gold reserves in the WGC's 19-year data series.

"Nine central banks increased their gold reserves by at least a tonne in the first half of 2019," the WGC said. "This continues the trend seen over recent quarters, where demand has been spread amongst a larger number of -- primarily emerging market -- central banks," the group added.

Demand from the official sector typically accounts for about 10% of total annual gold demand.

Physical holdings in gold-backed ETFs grew 67.2 t in Q2 to a six-year high of 2,548 mt compared with growth of 33.8 mt in Q2 2018. Strong inflows in June (+126.7 mt) outweighed April's sizable outflows (-57.2 mt), the WGC noted.

"Continued geopolitical instability, dovish commentary on monetary policy from central banks, and the rallying gold price in June were the main factors driving inflows into the sector," the WGC analysts said.

Demand from gold-backed ETFs accounts for about 3%-5% of total gold demand.

Second-quarter demand fro coins and bars fell 12% to 218.6 mt from 248.2 mt in Q2 2018, according to the WGC.

Indian demand rose 13% in the quarter to 44.5 mt compared with Q2 2018, while Chinese demand sunk 29% to 49.5 mt over the same period. Coin and bar demand typically accounts for 25%-30% of total gold demand.

Jewelry demand, which typically accounts for about 50% of total gold demand, rose 2% in Q2 2019 to 531.7 mt from 520.8 mt in the year-ago quarter, according to the WGC.

"Much of this growth came from India, where the jewelry market improved from the low base of 2018," WGC analysts said.

"There were a few areas of modest improvement, including the US and a handful of Middle Eastern countries, but the June price rally curtailed jewelry demand across many markets," analysts said.

-- Nick Jonson, nick.jonson@spglobal.com

-- Edited by Richard Rubin, newsdesk@spglobal.com