The latest global gold market report is out from the World Gold Council, covering the second quarter of 2013. This is a more interesting read than usual, because it covers the April crash in gold prices, and the secondary drop in June.
Of course, the major monkey wrench in the numbers was the massive outflows from exchange-traded products, as holders in paper gold bailed on the market. Even with the unprecedented worldwide scramble for physical gold, Q2 2013 numbers fell below Q2 2012. As the old sportscaster used to say, let’s take a look at the tape:
- Global gold supply in Q2 2013 shrank by 6%, a decrease of 62 tonnes. This was caused by:
- -21% in recycling. People held on to their scrap gold as prices plunged, but supply dried up.
- +4% in mine production. Miners increased physical production as refiners scrambled to fill orders from mints.
- Global gold demand broke out as follows:
- +78% gold coin and bar demand, setting a record of 507.6 tonnes for the quarter. Total value = $23.1 billion.
- +37% in gold jewelry demand, highest in five years. Total gold jewelry bought in the three months ending in June 2013 was 575.5 tonnes.
- -57% central bank purchases. Total purchases equaled 71.1 tonnes.
Overall demand in the quarter dropped by 12% to 856.3 tonnes, mostly because of the 402.2 t. of outflows from ETFs and related products. The fact that such a massive dump into the gold market in 90 days resulted in only a 12% drop is testament to the physical buying frenzy that occurred when prices fell $200/oz. Despite the large drop in gold prices, gold jewelry sales were UP 20% in dollar terms, from the sheer volume.
Here, we can see in graphic terms how the demand for “hold it and own it” gold exploded, as those who only held paper backed by gold abandoned the market: