Gold Demand Hits Q2 Record as Prices Soar

Despite gold prices hitting record highs this year, demand for gold continues to hit record highs as well. Overall gold demand in the second quarter of this year increased 4% year on year, reaching the highest levels seen since records were first kept in 2000.

Picking apart the data reveals some interesting trends in gold demand across various sectors, but particularly underscores the fact that Asian markets are becoming major drivers of gold demand and gold prices.

Where Gold Demand Is Dropping

One of the biggest drops in gold demand came from the jewelry sector, which saw gold demand drop by 19% year on year, falling to a four-year low.

Jewelry demand for both gold and silver tends to drop when prices rise, as the increased cost of metal makes it more costly to produce jewelry, and the increase in finished jewelry prices leads to slackened demand.

Unlike India, where gold jewelry is often seen as a form of gold investment, gold jewelry in the West is mostly seen as a decoration and luxury item, and thus higher prices tend to dampen demand.

Gold exchange-traded funds (ETFs) saw net outflows last quarter, although they were lower than Q2 last year. And while April saw outflows, inflows in May and June nearly made up for that.

That seems to indicate that higher gold prices are helping spur gold ETF demand, as ETF investors look to capitalize on the trend of higher gold prices by adding gold to their investment portfolios. So if gold prices continue to rise the rest of the year, gold ETF demand could rebound

Higher gold prices also led to a drop in demand for gold coins and bars among Western investors, leading to an overall 5% drop in coin and bar demand. However, the drop in demand in the West was counteracted by significantly stronger demand for gold from wealthy Asian investors.

That should serve as a reminder that it isn’t just what is happening in the West or what Western investors are doing that drives gold prices. Asia is becoming an increasingly important driver of world gold prices.

Where Gold Demand Is Rising

Speaking of Asia, despite the fact that China’s central bank appears to have paused its gold purchases for now, central bankers remain strong purchasers of gold. Although they’re buying gold at a slower pace than they were earlier this year, overall central bank purchases were still up year on year.

The AI boom, which has helped boost stock markets to record highs this year, is also impacting the gold market. All of those high-powered AI chips require gold to produce, which helped boost gold demand from the technology sector by 11%.

This demand from new markets in high technology products can be beneficial to both gold and silver. Both are used in electronics, medical devices, batteries, and other technology products, so demand in that sector should remain strong.

But the biggest boost to gold demand has been in the over the counter (OTC) market. What OTC means for gold is a transaction made between two parties directly, without using an exchange as an intermediary.

London has traditionally been a major gold OTC market, and indeed OTC demand in Q2 was the most robust it has been since data-keeping began back in 2000. Total OTC demand in Q2 made up more than 25% of total gold demand, and was up over 50% year on year.

So while record high gold prices depressed demand in some sectors of the gold market, it led to increased demand in others. If gold continues to set records over the rest of the year, it could very well lead to higher demand in the OTC market, which could help buoy the gold price.

Are You Benefiting From Gold?

Higher gold prices benefit gold owners, whether they’re looking to hold onto their gold for a few more years or looking to cash out. And with rate cuts and a potential recession on the horizon, the outlook for gold remains bullish.

Many Americans have already taken advantage of gold and silver to help protect and safeguard their financial well-being. Gold has hit record highs this year, and silver is starting to catch up.

But with the prospect of recession on the horizon, both gold and silver could have quite a bit more growth ahead of them. In the aftermath of the 2008 recession, for instance, gold nearly tripled from its 2008 low to its 2011 high, while silver more than quintupled.

Many people are hoping that gold and silver will repeat that kind of performance, a hope that has kept demand for gold and silver strong despite rising prices.

Could this be the last time gold is as “cheap” as it is today? Only time will tell.

But there were likely plenty of people who scoffed at gold hitting $800 near the end of 2007 and figured that it was overpriced back then. Except gold has never looked back.

Gold could be poised for another multi-year bull run just like 2008-2011. Or if inflation becomes entrenched, it could even repeat its performance from the 1970s, when its annualized rate of growth averaged over 30% per year over the course of that decade of hyperinflation.

One thing is certain, however. If gold takes off, people who thought about gold and held off buying it will likely be kicking themselves.

That’s why now is the time to start thinking about buying gold, before the gold price really goes on a run. With a gold IRA, you can protect existing tax-advantaged accounts with a tax-free rollover of your existing funds into a gold IRA.

That allows you to protect your tax-advantaged assets with physical gold coins and bars, while still enjoying the same tax advantages as any other IRA. Or if you have cash assets you want to protect, you always have the option of making a direct cash purchase of gold too.

With thousands of satisfied customers and over $2.5 billion in precious metals placements, Goldco has worked hard to become one of the best gold companies in the country. Our commitment to quality gold products and outstanding customer service has earned the trust of numerous Americans looking to protect their financial security with gold.

If you’re worried about how your savings and investments might fare as a result of rate cuts and possible recession, now is the time to start thinking about gold. Call the experts at Goldco today to learn more about how gold can help you safeguard your financial future.