Gold exchange traded funds may begin to dull as China cuts demand for gold jewelry and India consumption is expected to hit a five-year low on import restrictions.
Year-to-date, the SPDR Gold Shares (NYSEArca: GLD), iShares Gold Trust (NYSEArca: IAU) and ETFS Physical Swiss Gold Shares (NYSEArca: SGOL) have increased about 8.7%.
COMEX gold futures were relatively unchanged Thursday, trading around $1,315 per ounce.
According to the World Gold Council, total demand for gold was 964 metric tons in April to June, down 16% compared to 1,148 tons consumed during the same period year-over-year, the Wall Street Journal reports.
Demand for gold used in jewelry experienced a significant drop off, falling almost a third to 510 tons in the second quarter year-over-year.
Chinese demand plummeted 52% to 192.5 metric tons in the three months through June year-over-year, Bloomberg reports.
“The data confirms our view that Chinese gold demand will stay relatively weak compared with 2013, which only serves to drag gold prices lower into the second half,” Barnabas Gan, an economist at Oversea-Chinese Banking Corp., said in the Bloomberg article.
Additionally, a crack down on bribery and corruption has also “strongly discouraged purchases of bars and coins, along with other luxury-gift items,” the council said.
Meanwhile, gold demand in India, the world’s largest bullion consumer, is expected to fall as much as 13% to 850 metric tons this year, the lowest level since 2009, due to a 10% duty on imports to cut back the country’s widening current-account deficit, according to a separate Bloomberg report.
On the other side of the market, gold supply increased 10% in the second quarter to 1,078 tons, with mine production rising 4% to 765 tons.
Investors are also showing a greater preference for utilizing gold-related ETFs, the WGC said, pointing to investments rising by 4% in the three months through June to 235 tons. [Gold ETFs Buoyed by Geopolitical Tensions]
“Investors are now comfortable owning gold again in the form of ETFs and we’ve seen a very significant stabilization,” Marcus Grubb, managing director of investment strategy at the World Gold Council, said in the WSJ article.
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Max Chen contributed to this article. Tom Lydon’s clients own shares of GLD.