Market Overview

Slowdown in ETF Inflows Drives 4% Decline in Gold Demand in Q2 2018

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Global gold demand remained muted in Q2 2018 at 964 tonnes (t), 4% below
the same period in 2017, according to the World Gold Council's latest
Gold Demand Trends report. Slower inflows into gold-backed
exchange-traded funds (ETFs) created a weak comparison against the highs
of last year, contributing to the lowest H1 demand since 2009. Whilst
China, the world's largest gold market, saw a 7% rise in consumer demand.

ETF inflows continued, albeit at a much slower pace compared with the
high levels seen in 2016 and 2017.
Inflows were down 46% y-o-y.
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

The Gold Demand Trends Q2 2018 report, which includes
comprehensive data provided by Metals Focus, can be viewed at http://www.gold.org/research/gold-demand-trends
and on our iOS
and Android
apps. Gold Demand Trends data can also be explored using our interactive
charting tool http://www.gold.org/data/gold-supply-and-demand/gold-market-chart.

You can follow the World Gold Council on Twitter
at @goldcouncil
and Like on Facebook.

Note to editors:

World Gold Council

The World Gold Council is the market development organisation for the
gold industry. Our purpose is to stimulate and sustain demand for gold,
provide industry leadership and be the global authority on the gold
market.

We develop gold-backed solutions, services and products, based on
authoritative market insight and we work with a range of partners to put
our ideas into action. As a result, we create structural shifts in
demand for gold across key market sectors. We provide insights into the
international gold markets, helping people to understand the wealth
preservation qualities of gold and its role in meeting the social and
environmental needs of society.

The membership of the World Gold Council includes the world's leading
and most forward-thinking gold mining companies.

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