"Time is coming when markets search frantically for physical collateral to find that paper far exceeds underlying collateral for several metals and other resources. I am warning that when markets fall in sustained negative response to bursting bubbles, widespread deleveraging will reveal insufficient hard collateral underlying traded asset-backed securities. The words rehypothecation and hyper-rehypothecation may be rediscovered or remembered again, forgotten somehow during much of the decade since the Great Financial Crisis." Harald Malmgren
Key highlights Central banks bought 224.4t of gold in Q2 2019 This took H1 buying to 374.1t – the largest net H1 increase in global gold reserves in our 19-year quarterly data series. Buying was again spread across a diverse range of – largely emerging market – countries. Holdings of gold-backed ETFs grew 67.2t in Q2 to a six-year high of 2,548t The main factors driving inflows into the sector were continued geopolitical instability, expectation of lower interest rates, and the rallying gold price in June. A strong recovery in India’s jewellery market pushed demand in Q2 up 12% to 168.8t A busy wedding season and healthy festival sales boosted demand, before the June price rise brought it to a virtual standstill. Indian demand drove global jewellery demand 2% higher y-o-y to 531.7t. Bar and coin investment in Q2 sank 12% to 218.6t Combined with the soft Q1 number, the H1 total ended at a ten-year low of 476.9t. A 29% y-o-y drop in China accounted for much of the global Q2 decline. Gold prices shot to multi-year highs The gold price broke through US$1,400/oz for the first time since 2013. Among the factors driving this rally were expectations of lower interest rates and political uncertainty, with further support coming from strong central bank buying.
