Global gold demand falls 10% in Q3 – WGC

Global gold demand fell 10% year-on-year to 993 tonnes in the third quarter of the year, the World Gold Council said.

While net inflows into exchange-traded products (ETPs) helped drive a sharp increase in investment demand, this was not enough to offset falls in other areas, notably jewellery and purchases by central banks, the WGC said in a report on Tuesday, November 8.

Total investment demand rose 44% to 336 tonnes, with ETP inflows accounting for 146 tonnes – investors continued to build up their strategic allocations to gold, it noted.

The third successive quarter of inflows into ETPs, which were dominated by European funds, were predominantly driven by economic and geopolitical uncertainty ahead of the US election and also in Europe after the Brexit referendum decision and in advance of various European elections next year, the WGC said.

These flows were further supported by relatively expensive equity valuations and low-yielding sovereign bonds, it added.

Bar and coin demand fell 36% year-on-year to 190 tonnes.

Consumer demand in the world’s two biggest gold markets of China and India fell 22% and 28% respectively in the third quarter.

In China, economic uncertainty contributed to a softening in sentiment that was magnified by high gold prices and changing consumer behaviour, the WGC said.

In India, meanwhile, more stringent government policies, high gold prices and a squeeze on disposable rural incomes combined to dampen consumer sentiment, it said.

The fall in consumer demand in China and India were the key factors in total jewellery demand falling 21% year-on-year to 493 tonnes.

“The core physical markets of India and China continued to suffer under high prices and squeezed incomes in the third quarter but it looks like Q4 may be better,” Alistair Hewitt, head of market intelligence at the WGC, said.

“Price expectations have always been a key trigger for gold purchases and consumers responded quickly to the price drop in early October. And in the case of India, the first healthy monsoon in three years will boost rural incomes, supporting demand during the festive and wedding season,” he added.

Total mine supply reached 832 tonnes this quarter, down 4% year-on-year from 866 tonnes. The WGC attributed the relative stability to the cost-cutting programmes that have been a feature over the past few years.

As well, the rising gold price also encouraged consumers to recycle their gold, generating more than 341 tonnes of supply this quarter, up 30% year-on-year.

This was particularly prevalent in India, where consumers cashed in their holdings, swelling the amount of recycled gold in the region to 39 tonnes, its highest level since the fourth quarter of 2012.

(Editing by Mark Shaw)

 

 

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