Global gold demand totaled 953 mt in the second quarter, a fall of 10% on the year, as poor exchange-traded fund demand offset a rise in physical demand, the World Gold Council said Thursday.
Demand in the first half of the year fell 14% from the same period of 2016 to 2,400 mt.
The WGC attributed the fall to a "significant slowdown" in ETF demand over the period, with Q2 gold-backed ETF flows falling 76% on the year to 56 mt.
Monetary policy normalization and a high gold price were given as reasons for the fall from the record high a year earlier.
Bar and coin demand increased 13% on year to 241 mt in Q2, with H1 demand rising 11% to 532 mt, on strong demand from both India and Turkey, the WGC said.
This took total Q2 investment demand to 297 mt, down 34% on the year.
At the same time, physical demand rebounded in Q2, helped by strong Indian jewelry demand, which expanded by 41% on the year to 127 mt.
"The strong recovery had been widely expected after exceptional import figures were reported, hitting an all-time high of 104.6 mt in May as the market stockpiled gold ahead of the June GST rate announcement," the WGC said.
India reformed much of its taxation policy this year, placing a 3% duty on gold purchases as part of its nationwide Goods and Services Tax, introduced at the start of July.
Conversely, Q2 Chinese jewelry demand slipped 5% to 138 mt, its lowest for five years.
Global jewelry demand was more robust, however, up 8% on the year to 481 mt.
Central bank demand in Q2 totaled 94.5 mt, up 20% from 82 mt a year earlier.
Looking at supply, Q2 mine production was down marginally at 791 mt from 794 mt a year earlier.
Recycled gold also declined, down 18% on the year to 280 mt, taking total Q2 gold supply to 1,066 mt, down 8% on the year.
With total demand at 1,066 mt, Q2 recorded a surplus of 103 mt, down marginally from 105 mt a year earlier.
Looking ahead, Alistair Hewitt, Head of Market Intelligence at the World Gold Council, said: "There are a few things to watch out for in the rest of the year. Inflation data out of the US looks soft and markets have pushed out their expectations for a rate rise."
"The monsoon is looking good in India and, providing the market adapts to the new GST, we may see solid demand around Diwali. And as the next generation of smartphones gets rolled out, we may see good support for technology demand."
