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According to research released Thursday by the World Gold Council, global gold demand fell by 60% in the first half of this year compared to the same period in 2020, as an investment in precious metal fell by 60%. World gold demand, excluding over-the-counter deals, was 1,833.1 metric tons in the first half of this year, down 10% year on year, according to the data.
Conferring to the World Gold Council, the asset component of gold demand in the first half of the year was 455.9 metric tons, down 60% from the same period a year ago, when gold transaction fund (ETF) inflows were at an all-time high. Investment demand fell as gold prices plummeted during the era. Gold futures GC00, 1.04 percent, the most active contract, lost 6.6 percent in the first half of 2021. On Wednesday, the December contract, GCZ21, 1.02 percent, settled at $1,804.60 an ounce. According to the World Gold Council report, gold ETFs had an outflow of 129.3 metric tons in the first half of the year, compared to record 2020 first-half inflows of 731.2 metric tons.
Gold ETF net withdrawals in the first half of 2021 will outweigh gains from central banks, bar and coin investors, and jewelry buyers, according to Juan Carlos Artigas, worldwide head of research at the World Gold Council. He said that the outflows were “influenced by rising interest rates earlier in the year and renewed risk appetite as the global economy started to recover from the impact of COVID-19.”
Gold ETFs gained traction in the second quarter, but inflows were “insufficient to offset the huge outflows seen in the first quarter,” he added. Gold ETFs experienced net inflows of 40.7 metric tonnes in the second quarter, down from the “massive” 426.5 metric-ton inflows witnessed in the second quarter of 2020, according to the World Gold Council report. The previous year’s inflows were fueled by “rate decreases, surging safe-haven demand, and rising gold prices,” as per the report. However, bar and coin investment increased 45 percent year on year to 594.5 metric tonnes in the first half of this year, with China’s bar and coin demand for the time at 143.3 metric tonnes, “significantly” greater than the 77.7 metric tonnes recorded in the first half of 2020, according to data.
“The low base impact, dramatically improved economic conditions, and the greatly diminished impact of the COVID-19 pandemic,” per the report. Looking ahead, support for gold investment will likely come from “higher inflation, currency debasement, structural changes to asset allocation and attractive entry levels,” said Artigas. “While the prospect of rising interest rates can still pose a risk, we believe the central banks will take a cautious approach and keep monetary policy loose for some time.”
Story By: Norvisi Mawunyegah