Saturday, August 3, 2019

Global Gold Demand Hits H1 Three Year High as Central Banks & ETFs Lead the Charge

The World Gold Council has just released their latest figures for global gold demand for the first half of the year (H1) and as predicted, it once again ticked higher, solidifying an already strengthening trend and proving that the flight towards safety, towards precious metals in here to stay.

As I have written about numerous times over the past year, countries are adjusting to the new geopolitical uncertainty that the world now finds itself in. 

Trade wars are raging all across the globe, with the current US administration leading the charge, as President Trump seeks to fulfill one of his key campaign promises of placing "America first", bull charging ahead and shattering the normality of trade that the world created over the last few decades.

No matter where you stand on this situation, whether it is in support, disgust, or indifference, it matters little (at least until the 2020 elections), as this appears to be the new reality we now find ourselves in and is unlikely to change in the short term.

 A number of Central Banks, with the most notable being China and Russia, are finding themselves directly in the center of this geopolitical storm and are thus actively making plans to protect themselves from financial ruin, including the rapid accumulation of gold bullion and the shedding of US dollars.

As the World Gold Council highlights, H1 gold demand reached a three year high, hitting 2,181.7 tons, with Central Banks and ETF inflows leading the charge. This is an 8% increase year over year, illustrating just how strong the trend towards gold bullion is.

Central Bank buying accounted for 374.1 tons, leaving the market in H1, while ETFs, the next largest collective institutional purchaser added 67.2 tons in Q2, bringing their combined gold holdings to 2,548 tons, a six year high.

In addition to Central Banks and ETFs being large purchasers of gold, another key player in the metals market fiercely increased its demand, the Indian consumer.

On the heels of a strong wedding and festival season, India’s jewelry market increased its demand for gold bullion by 12% in Q2, accounting for 168.8 tons.

In many parts of the world, gold bullion is given the honor it deserves and is looked at for what it is, no matter the form it takes, whether it be bar, coin, or jewelry, it is looked at as money and treated as such.

This positive news in total global demand for gold bullion confirms the recent strong action we have seen in the price of precious metals, with the yellow metal posting impressive gains, breaking through the $1400 mark and trading solidly above it, building a floor.

Now, in addition to the Central Banks continuing their trend into gold bullion, we have the Federal Reserve once again cutting interest rates, just as the markets widely predicted they would do.

This has caused gold to sharply move higher, as people are finally waking up to the fact that the easy money party is not only going to continue, but get even better.

In classic FED double speak, Chairman Powell is quoted stating the following during Wednesdays rate cuts;

“Let me be clear – it’s not the beginning of a long series of rate cuts,”

Only to follow later with;

“I didn’t say it’s just one rate cut.”

FED jawboning at its finest.

What we can expect throughout the remainder of 2019 is continued strength in global gold demand, with silver eventually waking up and playing catch up. I believe this is where the real, significant gains are going to be made.

Strong demand in all likelihood is going to remain in place as Central Banks continue their accumulation process and as the FED continues to act in a dovish manner, doing the bidding of Wall St as they attempt to keep this artificially inflated market chugging along, for as long as they can.

In the mean time, remember the following. The trend is your friend until the end and the trend towards higher gold bullion prices is now solidly in place. Keep stacking.

- As first seen on the Sprott Money Blog