[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.
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.