Last week, the World Gold Council published a new edition of its quarterly report on gold demand. What does Gold Demand Trends Q2 2017 say about the demand for gold in the second quarter of 2017?
Gold demand in the second quarter of 2017 was 953.4 tons, a decline from 1,034.5 in Q1. It implies a 10-percent decline year-on-year. As in the previous quarter, the negative headline was mainly caused by weaker inflows into gold ETFs. Although global holdings increased by 56 tons, it was less than one-fourth of the exceptionally strong inflows seen in Q2 2016. Interestingly, European investors accountedfor the bulk of investment in the sector again, probably due to the uncertainty about the outcome of the elections in France. Actually, gold in European-listed ETFs hit an all-time high in Q2 2017.
To sum up, the demand for gold declined 10 percent in the second quarter of 2017. The decline was driven mainly by a slowdown in investment on an annual basis. Although the demand for the yellow metal dropped more than the supply, the price of gold did not decline, but defended its starting position, which indicates the limited usefulness of the presented data. Although the WGC remained optimistic about the gold demand, neglecting the weak ETF figures and pointing out to strong support from jewelry and technology, the truth is that gold prices are driven mainly by investment demand, not by technology or consumer purchases. Stay tuned!
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Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.
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