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World Central Banks and investment funds increased gold purchases in the first half of the year

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World Central Banks and investment funds increased gold purchases in the first half of the year
August 01
13:00 2019

Gold continues to amaze. According to the results of the first half of the year, the demand for the protective asset has increased to a maximum level over 3 years. Central Banks of different countries as well as investment funds supported by them are interested in gold.

Demand for this precious metal has grown 8% compared with the same period last year. In absolute terms, the growth has amounted to 2.18 thousand tons. Only in the second quarter, the indicator has risen 1.12 thousand tons.

Over the first half of 2019, central banks have purchased more than 370 tons of gold. According to the World Gold Council (WGC), this is the largest increase in world stocks of the asset over 19 years.

Poland has become the leader in the purchase of the protective asset. Over the second quarter, it has acquired 100 tons of the precious metal. It was only India who bought more gold in 2009. It is about the purchase of 200 tons of gold from the IMF. Russia is the second, having bought 94 tons in the first half of the year. China with an indicator of 74 tons has ranked third. Turkey (61 tons) and Kazakhstan (25 tons) follow it.

This year, funds backed by gold have increased their assets by more than 105 tons. Geopolitical conflicts as well as the easing of monetary policy by the World Central Banks caused the growth of the amount of precious metals. Moreover, increased gold prices in early summer have contributed to this process too.

Over the first 6 months, selling of jewelry has grown only 1%. It was mainly provided by India. Due to the fact that the jewelry market in this country began to recover, gold demand increased more than 10% and reached almost 170 tons in the second quarter of the year. The demand has increased due to the wedding season and holidays. However, it was almost completely leveled by the increased prices for precious metals in June.

Purchases of gold bars and coins have decreased to 475 tons. Such a semi-annual indicator is the lowest for 10 years. The main reason is the decline in demand in China. For the second quarter, interest in gold has fallen by a third in this country.

Over the second quarter, the supply on the gold market has grown 6% to 1.18 thousand tons. It has increased because of the record mining (more than 880 tons). What is more, a 9% rise of secondary processing due to increased prices was another reason for the supply growth. The total supply for the half year has totaled 2.32 thousand tons. This has become the largest indicator since 2016.

According to Alistair Hewitt, WGC’s head of market intelligence, the factors, which contribute to the growth for gold demand, will persist. It is about the second half of the year. There will be an influx into investment funds and an increase in purchases by banks. Due to the price increase, recession may occur at the consumer level.


The material was prepared with the participation of Katya Wilson,
a leading analyst of the brokerage company UFT Group

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