(Kitco News) – Gold demand from the jewelry sector should rebound following cuts to India’s import tariffs, while several silver majors ramped up production last quarter, according to precious metals analysts at Heraeus.
In their latest precious metals report, Heraeus noted that high gold prices have driven jewelry demand to a multi-year low.
“Global gold demand dipped to 929 t in the second quarter of the year (source: World Gold Council) as high prices impacted jewellery demand: volumes fell by 19% year-on-year to 411 t, the lowest quarter since 2020,” they wrote. “This stands in stark contrast to previous quarters when jewellery demand remained robust despite the rising gold price. Central banks remained buyers, adding 183 t to their reserves, a 6% increase year-on-year, but down sharply from Q1’24. Industrial demand improved by 11% year-on-year to 81 t, while investment demand was steady at 254 t.”
However, the sector could get a lift from India’s recent tax cuts on the yellow metal going forward. “In July, India lowered import tariffs on gold from 15% to 6%, and reduced capital gains taxes on holding gold, gold ETFs and mutual funds,” the analysts noted. “India’s gold demand has been restricted in recent months owing to high prices, which encourages smuggling, and some traders resorted to importing gold alloys to avoid the tariffs.”
“The tax reduction could now more directly benefit consumers by reducing costs and thus revive some jewellery demand,” they added. “It is anticipated to create an extra 50 t of Indian demand in H2’24.”
Heraeus said that gold managed to shrug off last week’s market turmoil from the disappointing jobs report and the Yen carry trade unwind, which impacted stock valuations around the globe.
“The gold price slipped modestly but the price is just 2% from its all-time high and shows the safe haven holding its value well,” they wrote. “The Fed is expected to cut rates in September which could be positive for the gold price.”
Gold prices are seeing a strong start to the week, with spot gold spiking to a session high of $2,457.58 shortly after the North American market open before pulling back below the $2,450 level. Spot gold last traded at $2,448.83 for a gain of 0.72% on the day.
Turning to silver, Heraeus noted that several major silver producers increased their production in the second quarter of the year.
“Buenaventura recorded 3.9 moz of silver production, a 178% increase year-on-year,” the analysts wrote. “As a result, Buenaventura lifted its 2024 guidance production by ~1.4 moz, to between 14.5 moz and 16 moz. Wheaton and Hecla produced 5 moz and 4.5 moz of silver, respectively, representing rises of 14% and 18% year-on-year. Both companies maintained their guidance production range. Most other major producers, including First Majestic and Fresnillo, also reported slightly higher quarterly output, and maintained their guidance for the year.”
However, the analysts pointed out that the miners’ contribution to global silver supply is still expected to decline from 830.5 million ounces in 2023 to 823.5 million ounces in 2024, according to the latest Silver Institute data.
Silver prices are outperforming gold for the first time in a little while on Monday, with the spot price enjoying a runup in the overnight session that saw it briefly breach resistance at $28 per ounce just before 7:30 am EDT.
Spot silver last traded at $27.770 for an increase of 1.16% on the daily chart.
