Where the tonnage and the price part company
The World Gold Council's Gold Demand Trends report for the second quarter puts central bank net purchases at 288.9 tonnes for the quarter, 56.5 tonnes for the first quarter and 345.4 tonnes across the first half. Set the three figures side by side and the weakness of the first quarter shows through. Total gold demand in the second quarter held flat at 1,268.9 tonnes year over year, and first half demand reached 2,522 tonnes, a 2 percent increase.[1]
By value the picture looks entirely different. First half demand reached a record $380 billion, and the LBMA (PM) gold price averaged $4,506.29 an ounce in the second quarter — 37 percent above a year earlier and 8 percent below the first quarter's record high. The value figure follows the price the tonnage was multiplied by; the tonnage itself barely moved.[1]
Who sold and who bought
The composition of physical demand shifted noticeably within the quarter. Exchange-traded funds saw outflows of 45 tonnes and total investment demand fell 46 percent year on year to 262.2 tonnes, while bar and coin investment remained steady at 307 tonnes. The side that pulled back was the fund investor who can trim an allocation with one instruction; the buyer holding the metal itself stayed put. The report said moderate outflows were in response to weaker gold prices and, particularly in North America, upward adjustments to both inflation and interest rate expectations alongside a strengthening US dollar.[1]
The inference is that central bank net purchases held the tonnage up in the second quarter, while investment demand retreated. The counter-reading has to stay on the table — official sector data are subject to later revision, and if the first half figure is pulled up the first quarter's weakness will look less stark than it does now. The signal to watch is still clear: if exchange-traded fund outflows continue while central bank purchases run near the first quarter's pace, third quarter total demand lands below 1,268.9 tonnes.[1]