The World Gold Council reports that for Q2 of 2014, Central Banks around the world increased gold purchases by 28% when compared to last year.
The report states that the increase in purchasing was likely due to the Central Banks using gold as a hedge against risk and to diversify away from the dollar.
The 2014 Q2 Gold Demand Trends Report also indicated an increase of 4% in total investment demand coupled with the lowest rate of recycling in seven years.
Despite this dramatic increase in gold hoarding by Central Banks and the rise in investment demand, the report states there were overall decreases in coin and bullion demand as well as in the jewelry sector. Unfortunately, any reports of overall worldwide gold demand remain flawed because China (the world’s largest consumer and producer of gold) altered its gold reporting this year in an effort to obscure the country’s overall demand. For good reason, China does not want the rest of the world to know when it is buying and selling gold. The World Gold Council has yet to make adjustments to its reporting to account for this change.
China and India account for 70% of the worldwide demand for gold. Until earlier this year, all gold sold in China had to go through Hong Kong which made the overall demand for gold easy to track and monitor. The numbers were publicly available. But earlier this year, China opened Shanghai, Shenzen, and Beijing to gold trade, and didn’t offer reporting on transactions– the World Gold Council does not have data on transactions outside of Hong Kong. It is widely believed that the majority of gold bought and sold in China now moves through these other cities, unreported.