Central Banks Fuel Gold Demand Surge Amid Jewelry Consumption Decline

Central banks around the world continued their gold-buying spree in Q2, purchasing 289 tons of the precious metal - a 62% increase year-over-year. This surge in official sector demand helped to offset weakness in jewelry consumption, which fell 17% to 278 tons due to high prices. The World Gold Council's Global Gold Demand Trends report showed that total global gold demand remained flat at 1,269 tons year-on-year.

Despite the decline in jewelry demand, consumer purchasing power for gold jewelry was severely suppressed by elevated prices. This led to a divergence between volume and value, with consumption value actually rising 14% year-over-year to $40 billion. The report also noted that over-the-counter (OTC) investment reached 327 tons in Q2, driven by strong momentum in Asia.

The National Bank of Poland stood out as the largest official gold buyer, adding 51 tons in Q2 and bringing its first-half net purchases to 82 tons. China's central bank also increased its gold holdings for the 20th consecutive month, accelerating its buying pace in Q2 with an additional 33 tons.