Nation's appetite for gold investment up in Q2

China saw a notable increase in investment sentiment for gold in the second quarter and may witness a further rise in investor appetite for such safe-haven assets, said the World Gold Council on Tuesday.

Gold exchange-traded fund inflows in the second quarter reached approximately 14 billion yuan ($2 billion), or 25 metric tons, setting a record high. In the first half, Chinese gold ETFs continued to attract inflows, with holdings and assets under management surging 50 percent and 77 percent, respectively, largely driven by rising prices of the yellow metal, said the WGC.

Investment in gold bars and coins surged to 80 tons last quarter, up 62 percent year-on-year, marking the strongest second-quarter performance since 2013.Rising gold prices and investor demand for wealth preservation boosted total investment in gold bars and coins in the first half to 190 tons, a significant 65 percent increase from the first half of the previous year.

Wang Lixin, CEO of the World Gold Council (China), expressed cautious optimism regarding physical gold investment demand in China for the second half.

"With domestic interest rates declining and potential pressure on local assets, there is a likelihood of increased demand for safe-haven investments among investors. However, uncertainties in gold price trends could potentially temper demand for bars and coins in the latter part of the year," Wang said.

Conversely, demand for gold jewelry in China hit a second-quarter low not seen since 2009 at 86 tons, impacted by soaring gold prices and the economic growth slowdown. First-half jewelry consumption in China dropped by 18 percent year-on-year to 270 tons.

In the second half, seasonal factors may spur a slight increase in domestic demand for gold jewelry, he added.

Globally, the second quarter witnessed record-high gold demand, rising 4 percent year-on-year to 1,258 tons, driving prices up, said the WGC. The average gold price for the quarter was $2,338 per ounce, an 18 percent increase year-on-year. Gold reached a record $2,427 per ounce in May.

Global central banks' reserves of the precious metal increased by 184 tons in the second quarter, a 6 percent rise year-on-year, slower than the previous quarter.

Despite China's central bank, a major buyer, maintaining its gold reserves at 2,264 tons in May and June after 18 consecutive months of increases, John Reade, chief market strategist at the WGC, said this would not alter the council's previous projections that global central banks may continue to increase gold holdings over the next 12 months as they do not foresee material changes in the second half.

Gold used in technology jumped 11 percent year-on-year in the first half, as the AI trend continued to drive demand in the sector, said the WGC.

Globally, retail gold bar and coin investment was 5 percent lower at 261 tons in the second quarter, primarily due to weak demand from Western markets. The record gold prices took its toll on second-quarter jewelry consumption, with volumes falling 19 percent year-on-year to a four-year low of 391 tons. There was also a minor 7-ton decline in global gold ETF holdings in the second quarter, said the WGC.