ETF inflows continued, albeit at a much slower pace compared with the high levels seen in 2016 and 2017. Inflows were down 46% y-oy. However, European-listed funds saw decent inflows we believe due to uncertainty stemming from Italian elections and monetary policy outlook. In contrast, holdings of North American-listed funds fell by 30.6t as investors focused on domestic economic strength.

Despite the Q2 decline, H1 jewellery demand was scarcely changed at 1,031t. Weaker demand in India and the Middle East in Q2 was only partly offset by growth in China and the US, both up 5% compared with the previous year. Indian demand fell 8% y-o-y, crimped by higher local prices, as well as by seasonal and religious factors. Q2 2018 saw the seventh consecutive quarter of year-on-year growth in the technology sector, with demand up 2% to 83t.

Gold used in electronics continued to thrive, due to enduring demand for smartphones, games consoles and vehicles. H1 demand reached a three-year high of 165t. Global bar and coin investment was virtually unchanged at 248t. Stronger demand in China and Iran – fuelled by increasing geopolitical tensions with the US – were offset by falls in Turkey, India and Europe, where local prices remained elevated. Central banks added 89t of gold to global official reserves in Q2 2018, down 7% compared with Q2 2017. Cumulative H1 2018 purchases of 193t were the highest since 2015.

Alongside the familiar cast list of Russia, Turkey and Kazakhstan, the Reserve Bank of India returned to the market, albeit with only a very small purchase (+2.5t). Alistair Hewitt, Head of Market Intelligence at the World Gold Council, commented: “It’s interesting how investors around the world have reacted to some of the risks stalking financial markets. Weaker economic prospects and tumbling currencies off the back of heightened tensions with the US boosted Chinese and Iranian gold demand, while US investors shrugged off any geopolitical concerns. Demand from tech companies continued to grow, with H1 demand reaching a three-year high, while economic growth boosted jewellery demand in the US with Q2 demand hitting a ten-year high.”

The total supply of gold increased by 3% in Q2 2018 to 1,120t, supported by increased mine production and recycling growth. Mine production in Q2 saw a rise of 3% to 836t, the highest Q2 on record, as projects in Russia, Indonesia and Canada continued to ramp-up. Gold recycling also grew, as currency weakness in India, Turkey and Iran boosted local gold prices and encouraged consumers to lock in profits from their holdings.

The key findings included in the Gold Demand Trends Q2 2018 report are as follows:

• Overall demand was 964t, a decrease of 4% compared with 1,008t in Q2 2017
• Total consumer demand fell by 1% to 758t, from 767t in the same period last year
• Total investment demand was down 9% to 281t compared with 310t in Q2 2017
• Global jewellery demand fell 2% to 510t, from 519t in the same period in 2017
• Central bank demand decreased by 7% to 89t compared with 96t in Q2 2017
• Demand in the technology sector increased 2% to 83t compared with 81t in Q2 2017
• Total supply was up 3% to 1,120t, from 1,086t in the same period last year
• Recycling was up 4% to 295t, compared with 283t in Q2 2017