Gold has fallen steadily this week, as sentiment has shifted in favour of a rise in US interest rates, strengthening the dollar. Gold fell through the $1,300 per ounce barrier early in the week and on Thursday morning was down by 1.6% on Monday’s opening price, at $1,280 per ounce.
Gold’s weakness has seen the share prices of physical gold ETFs move lower this week: the $34bn SPDR Gold Trust (NYSE: GLD.US) ETF has fallen by 1% to $124.22, leaving it up by 7.0% so far this year, while London-listed Gold Bullion Securities (LSE: GBS) has fallen 1.8% to $122.77, leaving it up by 6.1% so far in 2014.
Rising supply
The balance between supply and demand in the physical gold market also shifted in favour of buyers, during the second quarter. According to the latest figures from the World Gold Council, the supply of new gold to the market rose by 10% to 1,078 tonnes, compared to the same period last year, while demand fell by 15% to just 972 tonnes, down from 1,148t during the Q2 2013.
The big changes were in the jewellery market and the investment gold market. In jewellery, demand fell from 727t during the second quarter of 2013, to just 518t during the same period this year — the lowest level since Q4 2012. Similarly, demand for gold bars and coins was down heavily, dropping to 275t — down from 286t in Q1, and from 628t during the second quarter of 2013!
ETF outflows also continued, with a further 40t flowing out of physical gold ETFs during the second quarter, taking the total outflows for the last four quarters to 344t, which is equivalent to 8% of total 2013 gold supply.
Mining update
Gold mining shares have been relatively quiet this week, with no major news.
Debt-bound Russian gold miner Petropavlovsk fallen back to 34p, after last week’s sharp rally, but African firm Amara Mining (LSE: AMA) has held onto the gains it made last week, after reporting strong drilling results from the Yaoure Gold Project, which included an intercept of 17m at 7.35 grammes/tonne.
Amara’s share price has risen by 59% so far this year, making it one of the strongest performers in the sector.