As the government has increased the import duty on gold from 7.5 per cent to 12.5 per cent, gold smuggling could jump 33 per cent to touch 160 tonnes in 2022 as compared with the pre-pandemic period, according to the World Gold Council (WGC).
WGC estimates gold consumption at 800 tonnes this year, which is higher than 797 tonnes consumed in 2021. It is despite the duty hike, inflation and uncertainty.
The global gold industry body in another note said that despite Q2 weakness, strong first quarter ETF inflows fuelled a notable first-half recovery gold demand (excluding OTC) was 8 per cent lower y-o-y at 948 tonnes. Combined with Q1 this took H1 demand to 2,189 tonnes, up 12 per cent y-o-y. The LBMA Gold price PM averaged $1,871/oz in Q2, 3 per cent above the Q2 2021 average. However, this comparison conceals the 6 per cent decline in the price during the most recent quarter, pressured by rising interest rates and the rocketing value of the US dollar.
As the gold price fell in the second quarter, gold ETFs (exchange-traded funds) lost 39 tonnes, giving back some of the strong Q1 gains. Net H1 inflows totalled 234 tonnes compared with 127 tonnes of outflows in H1 2021, it said.
Bar and coin investment (245 tonnes) was unchanged from Q2 2021 as a sharp drop in China was offset by growth in India, the Middle East and Turkey. The H1 total saw a 12 per cent y-o-y drop to 526 per cent on compounded Chinese weakness.
“Q2 jewellery consumer demand reached 453 tonnes, 4 per cent higher y-o-y, although the comparison is with a fairly weak Q2’21. Total H1 jewellery demand of 928 tonnes was 2 per cent below H1 2021. Central banks continued to buy gold. Global official gold reserves grew by 180 tonnes in Q2, taking H1 net purchases to 270 tonnes,” it added.
Technology demand dipped in the second quarter, down 2 per cent y-o-y to 78 tonnes on weaker demand for consumer electronics. Demand in the first half was fractionally lower as a result at 159 tonnes.
“Continued growth in the second quarter lifted H1 mine production 3 per cent to 1,764 tonnes, a record first half for our data series. Mine production benefited from an absence of COVID-19-related lockdowns and was boosted by continued recovery in China following safety stoppages in 2021,” the WGC said.
Recycling activity remained elevated compared with 2021. Total H1 recycling of 592 tonnes was 8 per cent higher y-o-y. Higher average price levels, combined with increased economic hardship in many regions, supported recycling volumes.
The strict zero-COVID-19 policy in China also had a significant impact on the total bar and coin investment and jewellery demand. Lockdowns imposed in several key cities and regions throughout much of Q2 meant that access to retail outlets was cut off to large swathes of consumers.
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