Demand for gold falls by 10 per cent

17 August 2012

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17 August 2012 | Adam Leach

Demand for gold has declined by a tenth over the past three months and by 7 per cent compared with the same period last year.

According to Gold Demand Trends Q2 2012, published by the World Gold Council (WGC), there has been a drop in demand for the commodity from the technology, jewellery and investment sectors, with central banks proving to be the only sector buying more over the quarter. The WGC reported a five per cent decline in the technology sector. Supply levels were also found to have dropped, declining year-on-year by six per cent.

The causes for the fall were identified as the challenging global economic conditions and, in particular, a steep decline in purchasing levels from the key markets of China and India. Demand from the Indian jewellery sector dropped by 30 per cent compared with 2011, while in China it dropped by 9 per cent.

Marcus Grubb, managing director of investment at the WGC, said: “Gold’s performance reflects the continuing challenging economic climate. A softness in India and China, who between them represent 45 per cent of the total second quarter jewellery and investment demand accounts for much of the slowing of global gold demand.”

The slowing of the global economy also affected the decline in the technology sector. Efforts by companies to reduce the diameter of bonding wire, which is used to connect circuits with circuit boards, has enabled them to get more from less gold. Similarly, companies have been substituting gold for cheaper metals, copper-based wires in particular. Demand for gold in electronics applications on the whole dropped. But demand for it in the production of smart phones rose.

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