Consumer Demand For Gold Drops, Gold ETF Inflows At Record High

Gold prices have hit record highs, despite a fall in demand for physical gold, thanks to the Covid-19 pandemic.

The COVID-19 pandemic impacted the consumer sectors of the gold market in H1 2020, with total demand dropping by 6% to 2,076 tonnes versus the same period in 2019, according to the World Gold Council's (WGC) latest gold demand trends.

However, while overall gold demand fell, H1 saw record flows into gold-backed ETFs of 734 tonnes. The global response to the pandemic by central banks and governments, in the form of rate cuts and massive liquidity injections, fuelled these record inflows.

In contrast, bar and coin investment declined sharply in Q2 driven by Asian weakness and leading to a 17% decline to 397t in H1. With global markets in lockdown and consumers deterred by high gold prices and a squeeze on disposable income, jewellery demand fell by 46% to 572t and gold used in technology dropped 13% to 140t in H1.

Inflows into gold-backed ETFs (gold ETFs) accelerated in Q2, taking H1 inflows to a record-breaking 734 tonnes, the WGC said.

First half inflows surpassed the previous annual record from 2009 of 646t and lifted global holdings to 3,621 tonnes.

"The US dollar gold price gained 17% in H1, following a 10% increase during Q2. Strong inflows into gold-backed ETFs fuelled the rise. The gold price reached record highs in numerous other currencies, including euros, sterling, rupee and renminbi, among others," the World Gold Council said.