China and India go soft on gold as worldwide demand sinks 7% in Q2

Worldwide demand for gold in the second quarter of 2012 fell to 990.0t, down 7% in comparison to last year said the World Gold Council, which released its demand trends report on Thursday.

Gold's soft spots were Indian and China.

In India, investment and jewellery demand fell to 181.3t, down from 294.5t in Q2 2011. Demand for gold in the country was weak due to record high prices for the metal, fears of inflation and concerns about a weak monsoon season.

"China’s investment and jewellery demand was 144.9t, down 7% from 156.6t in the same quarter last year," writes the reports authors.

"Investment demand fell by 4% year-on-year to 51.1t as Chinese investors exercised restraint in response to the lack of direction exhibited by the gold price. The lack of sustained upward momentum in the gold price and the slowing of domestic GDP also discouraged consumers from buying gold jewellery, which saw a 9% year-on-year decline to 93.8t."

India and China account for over 45% of the total demand for jewellery and investment

The demand for gold-oriented ETFs were mostly flat, while the jewellery sector took it on the chin.

"Demand in the jewellery sector of 418.3t was 15% lower than 490.6t in Q2 2011, excluding India and China jewellery demand was down by 4%."

Investment demand was also off significantly.

"Investment demand fell by 23% year-on-year to 302.0t, slightly below the 5 year quarterly average of 340.3t. Excluding India and China, retail investment demand was up 16% year-on-year in tonnage terms."