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(Kitco Information) – The gold market noticed robust bodily demand within the first half of the yr, however slowing progress within the second quarter prompted the World Gold Council (WGC) to decrease its outlook for the remainder of the yr.
The WGC mentioned the difficult financial surroundings presents obstacles and alternatives for the dear steel. Of their combined outlook, analysts mentioned persistent inflation pressures coupled with rising market uncertainty will assist gold costs via the remainder of the yr. Nonetheless, the robust US greenback momentum will act as a big headwind.
“Some macroeconomic components, akin to aggressive financial coverage tightening and continued US greenback power, might create headwinds, however upside surprises for gold funding stay firmly on the desk,” the analysts mentioned within the report. .
The WGC lowered its outlook for 2022 in its second-quarter developments report launched on Wednesday. The WGC expects demand to be comparatively steady by the tip of the yr.
The report says that bodily gold demand fell by 948 tonnes or 8% in comparison with the second quarter of 2021. Nonetheless, bodily gold demand within the first half of the yr totaled 2,189 tonnes, 12% increased than within the first half of the yr. first half of final yr.
Though the primary half ended effectively, with mixed demand for bars and cash, ETFs and OTC posting the most important third half since 2010, the second quarter set a barely weaker tone for ETFs, which has continued to date in July. And this will set a precedent for the remainder of the second half given a potential decline in inflation amid aggressive financial coverage tightening,” the analysts added.
Though gold demand might decline through the second half of the yr, the WGC doesn’t anticipate to see the market collapse. Analysts mentioned there’s sufficient uncertainty available in the market to assist demand.
“Though inflation might begin to ease within the second half, the provision state of affairs in lots of commodity markets stays precarious and additional spikes can’t be dominated out. Such an surroundings would additional underscore the protection of gold. In any case, the Gold’s relative efficiency stays robust in 2022, reinforcing its diversification advantages in comparison with different hedges,” the analysts mentioned. “Moreover, geopolitics is all the time a wild card and stays a precedence for traders. And at last, traders’ web positioning in futures is traditionally brief, presenting short-covering danger in a constructive worth set off.” .
demand developments through the second quarter, the WGC mentioned a lot of the weak point will be attributed to declining funding demand. The report mentioned complete funding demand fell 28% within the second quarter.
Gold-backed exchange-traded merchandise noticed outflows of 39 tonnes within the second quarter, based on the report. On the similar time, bodily demand for bullion was comparatively unchanged from final yr.
“Lingering issues about inflation supported gold funding inflows, however financial tightening and a rising greenback had been possible the principle drivers of outflows. These pressures elevated on the finish of the quarter when the US Federal Reserve recession coupled with a collapse in commodity costs,” the analysts mentioned.
As for the ETF market, the WGC mentioned North American-traded funds led outflows. Analysts mentioned the selloff was because of the Federal Reserve’s aggressive financial coverage stance.
Together with weak funding demand, the report says that central banks’ urge for food for gold has additionally weakened. The report mentioned central banks purchased 180 tonnes of gold within the second quarter, down 14% from final yr.
Nonetheless, the WGC mentioned it expects central banks to proceed to be web patrons of gold, even when the tempo slows for the remainder of the yr.
“We see central financial institution demand rather more positively than in our earlier Gold Demand Traits report. Consequently, we revised our forecast for the complete yr complete to be largely unchanged from 2021, with the opportunity of one thing This is because of a mixture of decrease gross sales, continued shopping for from common patrons, and demand from establishments that haven’t been patrons in recent times – akin to Iraq – or for a very long time, akin to Eire,” mentioned the analysts.
One space of power within the gold market got here from demand for jewellery. The report mentioned international jewellery demand rose to 453.2 tons, up 4% from final yr. India’s jewelery demand dominated the worldwide market, rising 49% within the second quarter from 2021.
On the similar time, China’s ongoing COVID lockdowns continued to weigh available on the market, with jewelery demand falling 29% in comparison with final yr.
“Whereas international jewellery consumption has recovered from the worst of the COVID-induced weak point seen in 2020, it has but to get better the everyday quarterly averages, of round 550 tonnes, that characterised the few years earlier than the pandemic,” analysts mentioned within the report. .
Wanting forward, the WGC sees new challenges for the world’s two largest gold-consuming nations. Analysts mentioned they see slower jewelery demand in India within the second of the yr.
“Regardless of wholesome demand within the second quarter, the macroeconomic backdrop of a weaker forex, rising inflation and better rates of interest posed headwinds,” the analysts mentioned.
The report additionally famous that as demand falls, provide has elevated. The report indicated that complete gold provide reached an all-time excessive within the first half of the yr, rising 5%.
The WGC mentioned mine output rose 4% within the second quarter to 911.70 tonnes.
The report additionally famous a robust recycling within the gold market, with a rise of 8% within the second quarter.
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