Gold fell to its lowest level in 18 months on Thursday as first half year demand sinks to its weakest in almost a decade on the back of waning investor demand.
December futures trading in New York dipped to $1,221.50 a troy ounce, the lowest since February last year and now down 5% in 2018. July was the fourth straight month of declines in the gold price, the metal’s longest losing streak since 2013.
The latest report from the World Gold Council shows demand declined across all segments with slowing investment into gold-backed exchange-traded funds (ETFs) – down 47% year on year – responsible for the largest losses.
Overall demand fell 6% to 1,959 tonnes during the first six month compared to a year earlier and the lowest level since 2009. In the second quarter, global consumption fell 4% to 964 tonnes as investment demand including bars, coins and ETFs dropped 9%. ETF investors picked up just 61 tonnes during the first half, down 100 tonnes compared to the same period in 2017.
“It’s been a soft start to the year and that’s largely because of lower investment demand,” Alistair Hewitt, the WGC’s head of market intelligence told Reuters.
ETF investment was weakest in the United States, where a strong economy gave little incentive to buy gold, traditionally used as a safe place to store assets during political and economic uncertainty. Healthy inflows into North American funds in April were followed by two months of strong outflows, resulting in the region seeing Q2 outflows of 30.7 tonnes according to the report.
But in Europe, demand was bolstered by the rise of eurosceptic parties in Italian elections and uncertainty over European Central Bank policy, Hewitt said. In China an escalating trade dispute with Washington and falling stock markets drove investment demand.
“Towards the end of the second quarter we actually saw outflows from U.S. listed funds,” Hewitt said. “It really was the European inflows that meant we saw modest global inflows over the quarter.”
In Iran, meanwhile, sales of gold bars and coin was up three-fold after the United States pulled out of a deal on the country’s nuclear programme.
Jewellery demand failed to gain from a 5.4% fall in the price of gold over April-June because the currencies of key consumers including China, India and Turkey weakened, making dollar-priced gold more expensive for local buyers, the WGC said.
Jewellery consumption in India fell 8 percent in the second quarter to 147.9 tonnes, in part because of the weaker rupee. Demand in China was more resilient, rising 5% to 144.9
Increased mine production and recycling helped lift overall supply by 3% to 1,120.2 tonnes in the second quarter.
A bright spot was the technology sector, with usage in smartphones, consumer electronics and the auto sector responsible for seven straight quarters of year-on-year growth.