JOHANNESBURG (miningweekly.com) – Gold demand fell 12% to its lowest level in six years in the second quarter of this year, with the decline most visible in India and China, which together account for almost half the fall.

The World Gold Council’s second-quarter (Q2) Gold Demand Trends reported total demand of 915 t compared with 1 038 t in the corresponding period of last year, in spite of jewellery, bar and coin demand growth in both Europe and the US.

“It’s been a challenging market for gold this quarter,” World Gold Council market intelligence head Alistair Hewitt said.

Looking ahead, there are encouraging signs moving into what are traditionally the busiest quarters for gold buying in India and China, against a background of falling overall supply, with recycling falling 8% to 251 t.

Mine production, which was up 3% in Q2 to 787 t, is expected to taper off at the tail end of this year and to level out on three years of decline in exploration and development activity.

Overall jewellery demand was down 14% to 513 t, from 595 t in 2014, owing to falls in consumer spending in Asia.

In China, slowing economic growth and a rallying stock market led to a 5% fall in demand to 174 t.

In India, the heavy unseasonal rains in Q1 and drought in Q2 impacted rural incomes and affected gold demand.

In addition, a dearth of auspicious days for marriages in Q3 meant that wedding-related demand was unusually slow, leading to a fall in jewellery demand of 23% to 118 t.

For the first half of this year in India, jewellery was down 3% to 268.8 t from 276.1 t for the corresponding period last year.

The US remained steady, with jewellery demand up for the sixth consecutive quarter by 2% representing 26 t.

In Europe demand in Germany grew 7% and the UK and Spain each by 6%.

Global investment demand was down 11% to 179 t from 200 t in Q2 2014.

India was the main driver of the fall, down 30% to 37 t, owing to uncertain price expectations and a buoyant stock market.

This was countered by a rise in Chinese bar and coin demand, up 6% to 42 t.

In Europe, fears of a potential Greek exit from the eurozone saw retail investment in gold reach 47 t, a rise of 19% compared with last year.

The US also saw retail investment increasing by 7% on a huge burst of activity in June, when bullion coin sales by the US Mint hit a 17-month high.

Elsewhere, central banks continued to be strong buyers of gold and it is the 18th consecutive quarter where central banks were net purchasers of gold.

Net official sector purchases totalled 137 t, with Russia and Kazakhstan the biggest purchasers.

Total supply was down 5% to 1 033 t, with the increase in mine production of 3% to 787 t offset by 8%-lower recycling to 251 t.

Jewellery market prospects look healthier for the remainder of the year with the upcoming wedding and festival season in India.

In addition, falls in the gold price have historically triggered buying in the price sensitive markets of Asia and the Middle East.