Understanding gold demands
According to the latest gold demand trends report for 2Q15 published by the WGC (World Gold Council), gold demand plummeted by 12% since 2Q14. The demand stands at 914.9 tons for 2Q15, a six-year low, as demand in 2Q14 stood at 1,038 tons.
On the other hand, supply is down by 5% on a year-over-year basis. The slumping demands are mainly due to fewer jewelry buyers from India and China. However, demand in Europe and the US grew due to a greater number of jewelry buyers and high demand for physical gold.
Global investment demand
Global investment demand was down 11% to 179 tons in 2Q15 from 200 tons in 2Q14. India has been the primary driver of the gold demand downfall due to uncertain price moves in the precious metals market, as well as a buoyant stock market. The US saw high demand from the retail investors, and retail demand increased by 11%. Also, central banks have been active buyers of gold, with Russia and Kazakhstan being the biggest purchasers.
Alistair Hewitt, head of market intelligence at the World Gold Council, noted, “It is fair to say that investment demand for the quarter remained muted given the continuing recovery in the US economy and booming stock markets in India and China during the quarter.”
As of Friday, August 14, gold COMEX (commodity exchange) futures for August expiry were trading at $1,112.70, down by 0.26%. Similarly, silver dipped 1.21%, trading at $15.21.
Gold mining companies like Royal Gold Inc. (RGLD), Agnico Eagle Mines (AEM), and Yamana Gold Corp. (AUY) gained 5.84%, 7.33%, and 17.65%, respectively, on a five-day trailing basis. These stocks contribute significantly to the VanEck Vectors Gold Miners ETF (GDX), which surged 8.13% on a five-day trailing basis. Other stocks that have significantly lost in the past year include AuRico Gold Inc. (AUQ) and Silver Wheaton Corp. (SLW).
The Direxion Daily Gold Miners ETF (NUGT) rose a whopping 21.9% on a five-day trailing basis. The gold–silver spread gained 1.21% on August 14 and settled at $73.0851. The increase in the gold–silver spread signifies that you need more ounces of silver to buy a single ounce of gold, indicating that gold is getting stronger than silver. However, the gold–platinum and –goldpalladium spreads have declined by 0.05% and 0.29%, respectively.