Australian gold demand dropped 37 per cent in the second quarter of 2023 compared to a year earlier, according to the World Gold Council’s latest Gold Demand Trends report.
In contrast, total demand for gold worldwide (including over-the-counter transactions) increased by 7 per cent year-on-year (y/y), in what was said to be a sign of a solid gold market globally.
The report indicated that gold bar and coin investment had lost momentum in Australia during the quarter, with a fall of 49 per cent y/y to 2.9 tonnes.
“The slowdown is attributed partly to the high gold price and partly to the intensifying cost of living crisis, both of which are reflected in a pick-up in two-way activity. Nonetheless, anecdotal reports suggest the appetite for gold remains intact,” the World Gold Council said.
Notably, the fall in consumption seen locally in the past quarter came as Australian dollar gold prices hovered around record levels.
“Gold has performed exceptionally well this year, especially in Australia, up 7.2 per cent to 30 June, however this has also provided attractive selling opportunities for investors,” commented Shaokai Fan, head of Asia-Pacific (ex China) and global head of central banks at the World Gold Council.
“High prices have also likely tamped demand for jewellery as costs of living pressures are felt across the country.”
Globally, gold ETFs recorded outflows of 21 tonnes over the quarter, down considerably from 47 tonnes in the same quarter last year, bringing net outflows to 50 tonnes over the first half of 2023.
“Total holdings in Australian gold-backed ETFs remained steady at 41 tonnes, down just 0.5 per cent over the quarter, signalling continued appetite for physical gold as a means of investment diversification and a resilient store of value in portfolios,” said Mr Fan.
The World Gold Council reported that central bank demand for gold was down 35 per cent y/y to 103 tonnes, which it primarily attributed to net sales in Turkey “due to country-specific political and economic circumstances”.
But during the first half overall, central banks bought a record 387 tonnes, with quarterly demand said to be in line with the longer-term positive trend.
“Record central bank demand has dominated the gold market over the last year and, despite a slower pace in Q2, this trend underscores gold’s importance as a safe haven asset amid ongoing geopolitical tensions and challenging economic conditions around the world,” said Louise Street, senior markets analyst at the World Gold Council.
Meanwhile, bar and coin demand lifted 6 per cent y/y to 277 tonnes worldwide in the quarter, and a total of 582 tonnes in the half, due to growth in key markets such as the US and Turkey.
“Looking ahead to the second half of 2023, an economic contraction could bring additional upside for gold, further reinforcing its safe haven asset status,” Ms Street said.
“In this scenario, gold would be supported by demand from investors and central banks, helping to offset any weakness in jewellery and technology demand triggered by a squeeze on consumer spending.”
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.