Strong dollar, higher interest rates reduce gold global demand

Gold demand in the 3 months to end of June dropped to 948 tonnes
Strong dollar, higher interest rates reduce gold global demand
Gulf family shopping gold

Global gold demand fell 8 percent in the second quarter of 2022 as investors shifted their focus to rapidly rising interest rates and a strong US dollar, the World Gold Council (WGC) has said.

Gold demand in the three months to the end of June dropped to 948 tonnes, despite strong exchange-traded fund inflows in the first quarter, the trade body said in its latest report.

However, gold demand for the first six months of this year is up 12 percent compared with the same period in 2021 at 2,189 tonnes, the WGC said.

The price of gold averaged $1,871 per ounce in the second quarter, up 3 percent compared to the same period last year.

This comparison, however, conceals a 6 percent drop in prices over the last quarter, driven by higher interest rates and the skyrocketing value of the US dollar.

Gold exchange-traded funds (ETFs) recorded outflows of 39 tonnes in the second quarter, offsetting the strong inflow gains of 269 tonnes in the January to March period, according to the report. Net inflows in the first half totaled 234 tonnes, compared with 127 tonnes of outflows during the same period last year.

“However, the Q2 decline likely sets a weaker tone for ETFs in H2 given a potentially softening inflation outlook amid continued rate rises,” the WGC said.

Meanwhile, gold bar and coin demand remained unchanged year on year at 245 tonnes in the second quarter. Growth in demand came from India, the Middle East, and Turkey, which helped to balance the weakness from China that was partially driven by continued coronavirus lockdowns, the report said.

However, global bar and coin demand recorded a 12 percent annual decline at 526 tonnes in the first half of the year, it added.

Gold jewelry demand increased 4 percent annually to 453 tonnes in the second quarter, helped by a recovery in Indian demand, which increased 49 percent compared with the same period last year, the WGC said.

Gold prices rose to their highest level in three weeks on Thursday, following comments from Federal Reserve Chairman Jerome Powell that the US Central Bank may slow the pace of raising interest rates in the coming months, which impacted the dollar and US Treasury yields.

Gold prices in immediate transactions increased by 0.7 percent to 1745.20 dollars, the highest level since July 8.

The stories on our website are intended for informational purposes only. Those with finance, investment, tax or legal content are not to be taken as financial advice or recommendation. Refer to our full disclaimer policy here.