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Gold Demand Shrinks a Year After the Infamous Market Collapse

NEW YORK (TheStreet) -- A year after gold experienced its worst quarter in three decades, demand for the yellow metal has taken a hit.

Total demand for the second quarter of 2014 fell 16.1% to 963.8 tons from the same quarter a year ago, when the price of gold fell more than 23%, according to a report by the World Gold Council.

The report tallies central bank purchasing, jewelry, technology, buying of bars and coins and ETF and other similar financial products.

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While demand shrank, ETF outflows slowed as compared to the same quarter last year. Second-quarter outflows totaled 39.9 tons, while 2013 witnessed 402.2 tons of ETF outflows.

ETF inflows and outflows correlate closely to the price of gold, which gained nearly 3% in the second quarter of 2014. For comparison, the gold price dropped 23.7% during the quarter in 2013 when gold ETF outflows totaled more than 400 tons.

"Q2 [2013] demand was exceptional both because of the heavy outflows of ETFs, but also because you saw a ton of demand, or many many tons of demand … from the retail sectors," Juan Carlos Artigas, director of investment research at the World Gold Council, said in a phone interview from New York.

The steep drop last year in the gold price encouraged heavy buying among Asian consumers who viewed the asset as a cheap purchase. However, with the price climbing 9% in 2014 and holding above $1,300 an ounce, the current levels are making it a less attractive purchase, tamping down demand.

-- Written by Joe Deaux in New York.

>Contact by Email.

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