In the second quarter, global central bank purchases of gold slowed slightly, but remained positive. Coupled with healthy gold investment and strong demand for gold jewelry, gold prices have been effectively boosted.

Compared with a significantly higher than average level in the same period last year, the net purchase of gold by central banks in the second quarter was relatively lower, resulting in 921 tonnes of gold demand excluding over-the-counter transactions, a slight decrease of 2% year-on-year. However, when off-exchange and inventory flow meters are included, total demand in the second quarter increased by 7% year-on-year to 1,255 tonnes. 1

In the second quarter, despite the Turkish official gold sales due to special domestic market conditions, the global central bank still achieved a net purchase of 103 tons of gold in the second quarter, which also echoes the positive trend of global central bank gold purchases.

In the second quarter, despite the high price of gold, the consumption of gold jewelry still achieved a small increase, up 3% year-on-year to 476 tons; Gold jewelry production reached 491 tons, while inventories increased by about 15 tons in the second quarter. The increase in gold jewelry inventory is partly due to the Chinese market's gold jewelry consumption is not as optimistic as expected.

In the second quarter, investment in gold bars and coins increased by 6% year-on-year to 277 tonnes, with Turkey being one of the main drivers of growth. Global ETFs saw a net outflow of 21 tonnes in the second quarter (mainly in June), but the outflow was significantly lower than the 47 tonnes in the same period last year.

Otc investment surged to 335 tonnes in the second quarter. Despite ETF outflows and a reduction in COMEX net longs, gold prices are still gaining solid support, showing that while OTC trading is not transparent, this part of the market cannot be ignored.

Demand for technology gold remains weak, mainly due to weak demand for consumer electronics. Technology gold demand has remained at 70 tons for the second consecutive quarter.

All gold supply sectors posted gains, pushing total gold supply up 7% year on year to 1,255 tonnes in the second quarter. Gold mine production in the first half of the year is estimated to have reached a record 1,781 tonnes.

Other points

The midday LBMA price for the second quarter reached an all-time high of $1,976 per ounce. That's up 6% from the same period last year and 4% above the all-time high in the third quarter of 2020. Local gold prices have strengthened further in some countries, particularly in China and Turkey, as a result of exchange rate movements.

First-half gold demand (excluding over-the-counter transactions) fell 6% year-on-year to 2,062 tonnes. The year-on-year decline in the first half of the year was mainly due to the small outflows of gold ETFs this year, especially compared to the large inflows at the beginning of 2022. In the first half of the year, including over-the-counter and inventory flows, gold demand reached 2,460 tonnes, an increase of 5%.

The central bank's gold purchases hit a first-half record of 387 tonnes. The pace of central bank purchases slowed in the second quarter, though a strong start in the first quarter laid a solid foundation for a record first-half performance. Central banks in many emerging and advanced economies have been buying gold.

In recent quarters, developments in the local market have driven a surge in Turkish gold demand. Turkey's total demand for gold jewellery, bars and coins in the first half of the year reached 118 tonnes, the highest level of demand in the first half of the year since 2007, and the 2007 Turkish lira gold price is nothing compared to the current record gold price. Presidential elections, high inflation and a weak currency have all contributed to the surge in gold demand in Turkey.

Gold recycling in the first half of the year was up 9% year-on-year, with most of the growth coming from China and India. Recycling activity in China and India was relatively weak in the second quarter of last year, so growth in both markets had a base effect. Despite high gold prices and pressure on the cost of living, gold recycling has not picked up significantly in Western markets.