The steady devaluation of the Chinese yuan that has been ongoing now for three days is continuing to lend support to the gold price, driving it up for a time this morning to a 3½-week high of just shy of $1,130 per troy ounce. What is more, the SPDR Gold Trust, the world's largest gold ETF, recorded inflows of 4.2 tons yesterday, the highest daily inflow since the end of June.



As the World Gold Council (WGC) reported today, global gold demand in the Q2 plunged by 12% year-on-year to a six-year low of 914.9 tons, all demand components declining. Jewellery demand for example dropped by 14% to 513.5 tons, mainly because of China and above all India. Demand in India alone plummeted by 25% because a poor crop last year and bad weather this year means that the rural population had less disposable income, says Commerzbank.



Gold demand was down by 3% in China. Gold demand in both countries is set to recover again in the second half of the year, according to the WGC, with China and India each likely to consume 900 to 1,000 tons of gold in the year as a whole.



Demand for bars and coins decreased on a global level by 15% to 201.4 tons, while gold ETFs recorded outflows of 22.9 tons in the second quarter. Although central banks purchased only 137.4 tons of gold, which is less than in the same quarter last year, they were nonetheless net purchasers overall for the 18th consecutive quarter. The WGC expects to see central bank purchases totalling 400 to 500 tons for the year as a whole, notes Commerzbank.