Global demand for gold was 16% lower in the second quarter of the year, according to the latest data from trade body the World Gold Council.
The body says consumers and investors are stalling the recovery of gold prices – but overall demand for the precious metal is returning to levels of long term trends.
The latest data looks at the main markets for gold and gives a detailed report on how they are moving.
Half of the total worldwide demand for gold is from jewellery buyers – with the two largest markets in India and China.
Year-on-year demand for gold jewellery was down 30% in the second quarter of 2014, mainly due to attempts by the Indian government to restrict purchases by imposing extra taxes on buyers.
However, Indian consumers still purchased 154 tonnes of the 510 tonnes of jewellery supplied in the quarter. Chinese buyers grabbed 143 tonnes of gold jewellery.
Markets in the US and UK showed signs of revival. Demand for gold jewellery was up 15% in the US to 26 tonnes, while the British market was up 21% to 4 tonnes.
“We read these improved figures as a clear sign that the US and UK economies are recovering well and consumer confidence is rising as a result, said Marcus Grubb, Managing director of investment strategy at the World Gold Council.
Investment demand rose slightly – by 4%.
With the call for bars and coins dropping 56% year-on-year and more investors pulling out of exchange traded funds.
“Investors seem unsure about where the price of gold is travelling so are reducing their holdings to minimise their losses,” said Grubb. “Nevertheless, the outflows from ETFs are only running at 10% of the level we saw at the same time last year.”
Central banks holding gold are also an important market from producers. Demand from central banks was up 28% year-on-year.
“Several reasons are behind this rise,” said Grubb. “Many governments are looking at diversifying away from the US dollar and see gold as the most reliable alternative, while political problems in the Middle East also affected their decisions.”
Overall, the gold supply was up 10% on the previous year, explained by mines increasing output and reserves.
Recycling accounted for just a 1% increase in supply.
“Last year was an exceptional year for gold demand, and we could not expect to see record consumer purchases and investor sales continuing on the same scale,” said Grubb. “What we are seeing is increasing consumer confidence in buying gold and investors rebalancing their portfolios.”