The global demand for gold fell by 14 per cent in the June quarter to 858 tonnes against 1,000 tonnes in the same period last year. The fall in demand was the sharpest in the last six years, said a Thomson Reuters study.

Almost all major physical gold markets suffered in the second quarter as retail investment fell by 12 per cent even as the yellow metal’s prices dipped 7.5 per cent in dollar terms.

While jewellery production declined by six per cent to 478 tonnes in the June quarter, consumption of gold by this sector was down nine per cent to 444 tonnes, it said.

However, jewellery consumption in India increased 2.5 per cent to 158 tonnes in the second quarter. Retail investment was steady at 50 tonnes, thanks to buying during the Akshaya Tritiya festival.

Gross imports were down 10 per cent, the lowest in five quarters, said the study.

In China, poor sentiment towards gold continued and better returns from equity markets have led investors to shun the yellow metal. There are also signs that some investors have moved towards the US dollar as a safe-haven asset.

The People’s Bank of China announced the first increase to its official gold reserves in six years. As of June-end, China’s official gold reserves were about 1,658 tonnes an increase of 604 tonnes since the last time the central bank updated its figures in 2009. China has become the sixth-largest holder of the metal in the world, overtaking Russia.

Price forecast

According to a Thomson Reuters forecast, the average gold price will be $1,135 an ounce in the September quarter, before strengthening to $1,175 in the fourth quarter. The average price this year is expected to be at $1,180 an ounce, strengthening the base for average prices of $1,250 an ounce next year. Gold prices in the global markets fell to a five-year low of $1,072.35 an ounce last week as the dollar strengthened on expectations of the US Federal Reserve hiking interest rates later this year.

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