By Jasmine Horsey
GFMS raised its forecast for the average price of gold this year by $95 to $1,279 a troy ounce
LONDON—Physical demand for gold hit a seven-year low in the second quarter, but exchange-traded funds bought up enough of the metal to balance out the loss, London-based metals consultant GFMS said.
With continued political and economic uncertainties likely to continue buoying the price of gold, GFMS raised its forecast average price for this year by $95 to $1,279 a troy ounce.
“The first half of 2016 had seen a dramatic change in the rhythm and flows of the gold industry,” GFMS, a unit of Thomson Reuters, said in a commentary published alongside its latest Gold Survey. “The dramatic drop in physical demand is largely offset by the stellar western demand for ETFs.”
Physical demand fell particularly sharply in India and China, the world’s largest consumers of the metal. Many people in both countries buy the precious metal as jewelry and in coins and bars.
Demand in both was hit hard. China’s jewelry industry faced its worst second quarter performance since 2009, with demand contracting 31% year-on-year. Demand declined by 12% for bars and coins, according to the report.
In India, higher gold prices, a nationwide strike and lower demand from rural areas led jewelry consumption to fall by 56% year-on-year.
Demand for gold ETFs moved in the opposite direction as western investor sentiment warmed to the metal. The first half of this year set a new record in half yearly demand for gold ETFs.