Gold demand continues to grow

Broad-based, worldwide demand for gold continued to grow in the second quarter.

The latest issue of Gold Demand Trends, published by the World Gold Council, indicates that investors continued to show exceptionally strong interest in Japanese markets. This, combined with steady expansion in the U.S., helped raise total gold demand in developed countries to 234 tons, some 18% higher than the level indicated in the same quarter last year.

In Europe, jewelry demand was down some 4%, mainly because of weakness in Italian and German markets. However, overall demand in the first half of the year was 21% higher than in the first six months of 1994.

Markets in developing countries expanded under the impetus of 2-digit growth in demand, as monitored by the report. Second-quarter offtake, totalling 429 tons, was 11% higher than a year ago, while offtake for the first half of the year was some 15% higher than it was in the same period of 1994. The exceptions were Singapore (minus 41%), Mexico (minus 36%) and Hong Kong (minus 24%).

The gold price continued to fluctuate within a progressively narrow range. Price swings narrowed from US$20 early in the year to US$8 more recently, with the second-quarter average being US$8.50 higher than in the first quarter. Demand for gold liquidity remained strong, with 1-month rates continuing to hover above the 1% level.

Central bank activities — aside from the 175-ton sale by the National Bank of Belgium, and the Bank of Japan’s addition of 65 tons to its reserves — were relatively quiet during the quarter.

According to a spokesman for the World Gold Council, “the first half of 1995 has seen a continuation of the strong overall growth trend in demand for gold, which began in most of the world’s major markets in the second half of 1994.”