Demand for gold drops 10% in Thailand in Q2, data shows

Consumer gold demand in Thailand fell from 8.5 tonnes in the second quarter of 2022 to 7.6 tonnes in the same period this year, said Shaokai Fan, head of Asia-Pacific (ex-China) and global head of Central Banks at the World Gold Council.

According to the report, declining demand for gold was caused by a 10% year-on-year fall in demand for jewellery to 1.7 tonnes, from 1.9 tonnes in the second quarter of 2022. Meanwhile, total bar and coin demand fell 10% year on year, from 6.6 tonnes in the second quarter of 2022 to 5.9 tonnes in the same period this year.

Fan explained that the reasons for the decline in gold demand in Thailand are high gold prices, an uneven economic recovery, and political uncertainty.

"Gold jewellery demand fell to less than 2 tonnes as consumers were encouraged to sell back old gold jewellery rather than buy new," he said, adding that Thailand's gold demand was in line with global demand.

According to the Gold Demand Trends report, global demand for gold (excluding over-the-counter) in the second quarter of this year fell 2% year on year to 921 tonnes, due to a significant slowdown in central bank purchases compared to above-average purchases in the same quarter last year.

However, central banks purchased a record amount (387 tonnes) in the first half of this year and quarterly demand is in line with the longer-term positive trend. This indicates that official sector buying should continue to be strong throughout the year.

Despite the high gold price, jewellery consumption increased by 3% year on year to 476 tonnes. With 491 tonnes of jewellery manufactured, inventories increased by around 15 tonnes in the second quarter, owing in part to Chinese jewellery consumption failing to meet expectations.

Meanwhile, investment in gold bars and coins increased by 6% year on year to 277 tonnes, with Turkey being a major driver of growth. Furthermore, while exchange traded funds saw net outflows of 21 tonnes (concentrated in June), this was significantly lower than the 47-tonne outflow seen in the same quarter last year.

In terms of global gold supply, it was 7% higher year on year at 1,255 tonnes in the second quarter, with mine production estimated to have reached a record for the first half of this year at 1,781 tonnes.

Louise Street, World Gold Council's senior markets analyst, pointed out that despite a slower pace in the second quarter, central bank demand for gold highlights gold's importance as a safe-haven asset amid ongoing geopolitical tensions and challenging economic conditions around the world.

"Looking ahead to the second half of 2023, an economic contraction could bring additional upside for gold, further reinforcing its safe-haven asset status," he said, adding that in this scenario, gold would be supported by demand from investors and central banks, helping to offset any weakness in jewellery and technology demand caused by a drop in consumer spending.