The World Gold Council has published data for the gold demand for the second trimester of 2018.
The demand for the yellow metal dropped to 964.4 tons or 4.3% in the second quarter of 2018 from 1,0007.6 tons in the second quarter a year earlier.
The steep decline was mainly due to a nearly 46% decrease in the holdings of exchange-traded funds (ETFs) and similar products and a 7.3% decrease in the global official reserves of gold held by central banks and other institutions.
As of June 30, the total volume of gold held by central banks worldwide was 89.4 tons. During the first six months of 2018, the central banks bought 1,936.3 tons of gold. That was the highest purchase since 2015.
Domestic economic strength attracted the attention of U.S. investors to the extent that gold-backed exchange-traded funds amassed 33.8 fewer tons. About 83% of total inflows of gold during the first half of 2018 was absorbed by European-listed exchange-traded funds.
The demand for gold in the technology sector reached the highest in three years. Ongoing demand for wireless applications drove the growth in the technology sector. However, the 2.2% increase to 83.3 tons of gold used in the technology sector was not enough to offset the declines in the volume of gold held by ETFs, central banks and other institutions.
Compared to the prior-year quarter, gold used in jewelery also slid nearly 2% to 510.3 tons. The loss was a result of sluggish demand from India and Middle Eastern countries.
China and the U.S. tried to give a boost, but it was too feeble to offset the weak demand from India and the Middle East.
At 247.6 tons, the global investment in gold bars and coins was flat year-over-year. Geopolitical tensions among the U.S., China and Iran caused a rush into the precious metal by China and Iran. However, the growth in the demand for bars and coins in those countries was not followed by other markets such as Turkey, India and Europe countries, where a prolonged elevation of prices discouraged investors.
The World Gold Council also reported that the gold demand of 1,959.9 tons for the first six months of 2018 was the lowest in the last 10 years.
On the supply side, the volume of metal that gold mining companies placed on the market slightly increased for the second consecutive trimester. The total supply of gold was 1,120,2 tons in the second quarter of 2018, a 3% rise from the first quarter of 2018.
Gold traded Monday around $1,216.30 per troy ounce on the London Bullion Market. It is down $87.8 per troy ounce compared to the year-to-date cumulative average price of $1,304.10 per troy ounce.
The bullion has fallen 7.3% so far this year.
The cumulative average is nearly $47 per troy ounce, down compared to the cumulative average of 2017.
Disclosure: I have no positions in gold.
