Global ETFs buy more gold than India, China

GFMS revises its average gold price forecast for 2016 to $1,279, from $1,184 per oz in April

Demand by global exchange-traded funds, especially in London and North America, was higher than demand from the world's two largest consumers, India and China, in the first six months of 2016.

Gold prices recovered sharply in 2016, initially due to bargain hunting and later over fears of Britain exiting the Europe Union (EU). High prices and measures by the government like tighter PAN disclosure and an excise duty on gold jewellery, however, suppressed demand in India.

India's demand for jewellery and investment gold was 142 tonnes, 52 per cent lower than the first half of 2015. While China bought 50 per cent more gold for jewellery than India, it was still 24 per cent lower than in the same period a year ago.

The two countries' investment and jewellery demand together was 505 tonnes, lower than the 568 tonnes of ETF demand globally, according to the June quarterly report by GFMS Thomson Reuters today. ETFs surpassing gold demand in India and China is crucial because these two countries constitute half the world demand.

The June quarter was among the worst for Indian gold demand and imports. "Even Akshaya Tritiya has seen demand 45 per cent lower than a year ago," the report said.

Cash market gold was quoting at a discount of $100 per oz in many cities at the end of June, a reversal from two years ago when the premium was $100 per oz. In the official gold market in India, the discount was $60 per oz at the end of June.

This was due to higher inflows of unofficial gold, destocking of old gold by jewellers and buyers exchanging old jewellery. India's June quarter imports at 78 tonnes were the lowest after the September 2013 quarter when the 80:20 scheme was implemented.

Central banks globally bought less gold this year and supply was high as buyers encashed old gold, the report said. GFMS has revised its average gold price forecast for 2016 to $1,279 per oz from $1,184 per oz made in April on lower chances of the US increasing interest rates and fears relating to Brexit.