Physical gold demand globally rose to 1,895 tonnes in the first half of 2017, up 17 percent from the same period last year, GFMS analysts at Thomson Reuters said.
But the market saw a surplus of 138 tonnes in the first six months compared to a balanced market in the same period last year, despite supplies shrinking more than five percent to 2,160 tonnes.
That was mainly due to physically-backed exchange traded funds, where demand fell to 145 tonnes from 569 tonnes.
"After the rollercoaster ride of events for the gold market in 2016, from a jewellers’ strike to Brexit to Trump to demonetisation, 2017 has avoided similar market moving events in the first half," GFMS said in a report on Thursday.
"The first half of this year has arguably been more of a reversion to normality ... with neither the highs of ETF demand or lows of seriously struggling Asian demand."
Demand in China, a top consumer, fell seven percent to 292.7 tonnes.
In India, another major market, demand nearly doubled to 307.6 tonnes, ahead of a three percent tax levied from July 1.
"Given the introduction of the Goods & Services Tax (GST) in India there is a relative hiatus in imports to that crucial market at present," GFMS said.
"This is leaving gold prices susceptible to softness, not least as it is often Indian demand that responds positively to price weakness."
GFMS expects to see gold prices fall below $1,200 an ounce over summer in the northern hemisphere before recovering to average around $1,256 an ounce in the last quarter of 2017, due to a "seasonal upturn in demand in Asia and a recovery in western investment".
"The latter may well be buoyed by geopolitical instability and/or potential correction to equity markets. Indeed, the S&P 500 is already in its second longest bull run since World War Two," GFMS said.
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