“China and India were the biggest contributors to the decline in H1 demand: their size relative to the rest of the gold jewellery market means weakness in these two countries has an overwhelming impact on global demand,” the WGC report notes.
The strict lockdown
imposed in late March eclipsed the gold buying festival of Akshaya Tritiya – one of the most auspicious days for buying gold in India. As a result, physical store sales were not possible, and only those retailers with an online presence were able to cater to demand.
“As restrictions eased mid-quarter, activity started to recover in select regions. June saw further improvement, with the release of some pent-up demand. However, a lack of weddings and auspicious days in the month, along with recurring lockdowns in certain regions and the high and rising gold price, prevented a meaningful recovery in demand,” WGC said.
China, on the other hand, saw an uptick in demand in the June 2020 quarter as the country opened up for business after the Covid-19
However, the overall demand in the first half remained muted. Most retailers in China, according to the WGC report, attributed the continued weakness to a combination of high and rising gold prices, falling disposable incomes and an increased preference for lighter-weight gold jewellery products.
Inflow into ETFs up
The uncertainty over the pandemic and its impact on the other asset classes saw investors rush to gold as a safe-haven asset. Global investors, according to WGC, added record amounts of gold-backed exchange-traded funds (ETFs) to their portfolios in the first half of 2020.
“Inflows into these products reached 734t by the end of June, taking total global holdings to a new record high of 3,621t, with assets under management (AUM) hitting a record $205.8 billion. Q2 saw inflows of 434 t, almost matching the Q1-2009 quarterly record of 465.7 t seen during the depths of the Global Financial Crisis (GFC),” the WGC report said.
These flows helped lift the gold price, which gained 17 per cent in US dollar terms over the first half and hit record highs in many other currencies. On an overall basis, gold demand
across the globe slumped 11 per cent y-o-y to 1,015.7t in the June quarter, while demand for the first half year was 6 per cent weaker at 2,076 t.