Global gold demand declined in the first half of the year from the same period in 2020, as investment in the precious metal dropped by 60%, according to a report from the World Gold Council released Thursday.

In the first six months of this year, world gold demand, excluding over-the-counter trades, totaled 1,833.1 metric tons, down 10% year on year, the report said.

The investment segment of gold demand in the first half of the year, which includes bars and coins and gold-backed exchange-traded funds (ETFs), totaled 455.9 metric tons, down 60% from the same period a year earlier, when gold exchange-traded fund (ETF) inflows were at a record, the World Gold Council report said.

Investment demand fell as prices for gold declined for the period. Based on the most-active contract, gold futures
GC00,
+0.99%

fell 6.6% in the first half of 2021. The December contract
GCZ21,
+0.98%

settled at $1,804.60 an ounce on Wednesday.

Read: Gold prices end slightly lower Wednesday, extend decline after Fed policy statement

For the first half of the year, gold ETFs saw an outflow of 129.3 metric tons, compared to record 2020 first-half inflows of 731.2 metric tons, the World Gold Council report said.

Gold ETF net outflows in the first half of 2021 offset gains from central banks, bar and coin investors and jewelry buyers, Juan Carlos Artigas, global head of research at the World Gold Council, told MarketWatch. He said the outflows were “influenced by rising interest rates earlier in the year and renewed risk appetite as the global economy started to recover from the impact of COVID-19.”

Gold ETFs gained momentum in the second quarter, but the inflows for the quarter were “not enough to counteract the heavy outflows witnessed during Q1,” he said.

In the second quarter, gold ETFs saw net inflows of 40.7 metric tons, though inflows were less than 10% of the “huge” 426.5 metric-ton inflows seen in the second quarter of 2020, the World Gold Council report said. The inflows a year earlier were driven by “rate cuts, growing safe-haven demand and rising gold prices,” the report said.

Bar and coin investment, however, climbed to the highest since 2013, up 45% year on year to 594.5 metric tons in the first half of this year, with China’s bar and coin demand for the period at 143.3 metric tons, “significantly” higher than the 77.7 metric tons seen in the first half of 2020, data showed.

The report attributed that increase largely to “the low base impact, vastly improved economic conditions and the greatly reduced impact of the COVID-19 pandemic.”


“While the prospect of rising interest rates can still pose a risk, we believe the central banks will take a cautious approach and keep monetary policy loose for some time.”


— Juan Carlos Artigas, World Gold Council

Looking ahead, support for gold investment will likely come from “higher inflation, currency debasement, structural changes to asset allocation and attractive entry levels,” said Artigas. “While the prospect of rising interest rates can still pose a risk, we believe the central banks will take a cautious approach and keep monetary policy loose for some time.”

Read: Fed says economy has ‘made progress’ toward standards for tapering, but not enough to start yet



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