[VIDEO] World Gold Council report: Gold demand drops to six-year low
The World Gold Council’s Gold Demand Trends report for Q2 2015 shows total demand was 915 tons, a fall of 12 percent compared to the same period last year, due mainly to a decline in demand from consumers in India and China. However, demand in Europe and the US grew, driven by a mixture of increasingly confident jewelry buyers and strong demand for bars and coins. Looking ahead, there are encouraging signs moving into what are traditionally the busiest quarters for gold buying in India and China.
Overall jewelry demand was down 14 percent to 513 tons, from 595 tons in 2014 due to falls in consumer spending in Asia. In China, slowing economic growth and a rallying stock market led to a five percent fall in demand to 174 tons. In India, the heavy unseasonal rains in Q1 and drought in Q2 impacted rural incomes and affected gold demand. In addition, a dearth of auspicious days for marriages in Q3 meant that wedding-related demand was unusually slow, leading to a fall in jewelry demand of 23 percent to 118 tons. Overall, if we look at the picture for the first half of this year in India, jewelry was down three percent to 268.8 tons from 276.1 tons (H1 2014). The US remained steady, with jewelry demand up for the sixth consecutive quarter by two percent (26t). In Europe demand was also up, with Germany up seven percent and the UK and Spain both growing by six percent.
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Global investment demand was down 11 percent to 179 tons from 200 tons in Q2 2014. India was the main driver of the fall, down 30 percent to 37 tons, due to uncertain price expectations and a buoyant stock market. This was countered by a rise in Chinese bar and coin demand, up six percent to 42 tons. In Europe, fears of a potential Greek exit from the eurozone saw retail investment in gold reach 47 tons, a rise of 19 percent compared to last year. The US also saw strong demand, with retail investment increasing by seven percent. Of particular note was the huge burst of activity in June, when bullion coin sales by the US Mint hit a 17-month high.
Elsewhere, central banks continued to be strong buyers of gold. Net official sector purchases totaled 137 tons, with Russia and Kazakhstan the biggest purchasers. Although a year-on-year fall of 13 percent, buying increased by 11 percent when compared with the first quarter of this year. It is the 18th consecutive quarter where central banks were net purchasers of gold.
Total supply was down five percent to 1,033 tons, as an increase in mine production of three percent to 787 tons in Q2 2015 was offset by declining recycling levels - down eight percent to 251 tons. The indication for H2 2015 is that mine production will slow as the gold mining industry continues to manage their costs and optimize operations in the face of challenging markets.
Alistair Hewitt, Head of Market Intelligence at the World Gold Council, said: “It’s been a challenging market for gold this quarter, particularly in Asia, on the back of falls in India and China. The reverse is true for western jewelry markets, as increased economic confidence led to continued growth in consumer demand. It is fair to say that investment demand for the quarter remained muted given the continuing recovery in the US economy and booming stock markets in India and China during the quarter.
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Jewelry market prospects look healthier for the remainder of the year with the upcoming wedding and festival season in India. In addition, falls in the gold price have historically triggered buying in price sensitive markets and we are already seeing early indications of this across Asia and the Middle East. Conversely, sharp falls in Chinese stock markets have shaken the largely consumer investment base and we are seeing early indications of interest in buying gold again - all illustrating the unique self-balancing nature of gold demand and the diverse drivers which underpin it.”
Gold demand and supply statistics for Q2 2015
• Overall demand was down 12 percent in Q2 2015 to 915 tons compared to 1,038 tons in Q2 2014.
• Total consumer demand – made up of jewelry demand and coin and bar demand – totaled 715 tons, down 14 percent compared to Q2 2014.
• Global jewelry demand was 513 tons, down 14 percent compared to the same period last year, due to falls in China, down five percent to 174 tons, as well as India, down 23 percent to 118 tons. The US and Europe saw continued growth with the US up two percent to 26 tons, and Europe up one percent to 15 tons.
• Total investment demand was down 11 percent to 179 tons, compared to 200 tons in the same quarter the previous year. Demand for bars and coins saw a 15 percent drop to 201 tons from 238 tons the previous year, as the sector was affected by an expected increase in US interest rates and a continued shift towards other asset classes, notably equities. ETFs saw outflows totaling 23 tons; lower than the outflows of 38 tons seen in the same quarter last year.
• Central banks continued to be strong buyers of gold, accounting for 137 tons in Q2 2015, slightly down on the equivalent quarter last year, but up 11 percent compared to the previous quarter. It was the 18th consecutive quarter where central banks were net purchasers.
• Year-on-year quarterly mine production increased three percent to 787 tons in Q2 2015, against 763 tons in Q2 2014. Recycling levels were down eight percent year-on-year to 251 tons compared to 273 tons in Q2 2014, resulting in total supply falling five percent to 1,033 tons.
View the report in its entirety here.
Lithium producers bullish as EV revolution ramps demand
Rising demand for lithium is stoking prices for the electric vehicle battery metal, fueling long-delayed expansions that still may not produce adequate supplies that automakers need to meet aggressive production plans.
Growing industry optimism from higher lithium prices is a change from last year when funding for mines and processing plants dried up during the pandemic.
Albemarle Corp, Livent Corp and other producers are scrambling to make more lithium, but some analysts worry the recent price jump will not spur a big enough expansion to meet a planned wave of new EV models by mid-decade.
Since January, General Motors Co, Ford Motor Co LG Energy Solution and SK Innovation Co, along with other automakers and battery parts manufacturers, have said they will spend billions of dollars on EV plants.
U.S. President Joe Biden has proposed spending $174bn to boost EV sales and infrastructure. The European Union has similar plans, part of a rush to catch up with global EV leader China.
Those moves have helped an index of lithium prices jump 59 percent since April 2020, according to data from Benchmark Mineral Intelligence, a commodity pricing provider.
The rising demand “reflects what feels like a real and fundamental turning point in our industry,” said Paul Graves, chief executive of Livent Corp, which supplies Tesla Inc. On Monday, it said it would more than double its annual lithium production to 115,000 tonnes.
Graves warned, though, that “it will be a challenge for the lithium industry to produce sufficient qualified material in the near and medium term.”
Albemarle, the world’s largest lithium producer, aims to double its production capacity to 175,000 tonnes by the end of the year when two construction projects are complete. Albemarle's Q1 profit beat expectations thanks to rising lithium prices. Chile’s SQM, the No. 2 producer, said its goal to expand production of lithium carbonate by 71 percent to 120,000 tonnes should be complete by December.
Australia’s Orocobre is paying $1.4 billion for smaller rival Galaxy Resources, a strategy designed to boost scale and help it grow faster in regions closer to customers.
“The next few years are going to be critical in terms of whether there’s enough available lithium supply, and that’s why you’re starting to see commodity prices start to ramp,” said Chris Berry, an independent lithium industry consultant.
The price gains helped Albemarle and other major producers, including China’s Ganfeng Lithium Co and SQM, post big gains in first-quarter profit and boost forecasts for the year.
Even China’s Tianqi Lithium Corp, saddled with debt due to years of low lithium prices, signaled that recovering demand should help it swing to a profit this year.
Forecasts call for demand for the white metals to surge from about 320,000 tonnes annually last year to more than 1 million tonnes annually by 2025, when many automakers plan to launch new EV fleets, according to Benchmark.
Still, demand is expected to outstrip supply in 2025 by more than 200,000 tonnes, so lithium prices may need to rise to encourage producers to build more mines. That could boost the prices consumers pay for EVs. “Companies across the lithium-ion supply chain are in the best position they’ve been in for the last 5 years,” said Pedro Palandrani of the Global X Lithium & Battery Technology ETF , which has doubled in value in the past year.