Low gold prices in Q3 fuel rise in demand

The following is an edited summary of the World Gold Council’s Gold Demand Trends report for this year’s third quarter. For the full report, please visit www.gold.org.

Total gold demand in this year’s third quarter stood at 1,121 tonnes, which is an 8% increase from the same period last year, according to the World Gold Council’s latest Gold Demand Trends report.

The quarter consisted of two halves. In the first part, a number of factors, including exchange-traded fund (ETF) outflows, contributed to a price dip that buoyed consumer demand worldwide. A shift in tactical investor positions in the latter part of the quarter led to modest ETF inflows in August and September, which helped push prices back up.

Global investment demand saw an increase, up 27% to 230 tonnes. Bar and coin purchases were up by a third in third-quarter 2014, with Western markets showing a surge. In the U.S., bar and coin demand reached its highest total in five years, up 207% to 33 tonnes.

Europe also saw demand in the investment sector, amid concerns about the Greek debt crisis and uncertainty in Eastern Europe — including continuing tensions between Russia and Ukraine — and saw demand climb by 35% to 61 tonnes. In China, investment demand grew by 70% to 52 tonnes, with demand stimulated by the gold price weakness in July, fuelled by the August foreign exchange reform. In India, the investment sector saw its first increase since third-quarter 2014, up 6% year-on-year to 57 tonnes.

Jewellery demand for this year’s third quarter was 632 tonnes, compared to 594 tonnes in third-quarter 2014, and up 6% year-on-year. Consumers in India, China, the U.S. and the Middle East took advantage of lower prices in July and August. This was evident in India — with festival purchases brought forward — resulting in a 15% increase in jewellery demand to 211 tonnes over the period.

Central banks remained a source of demand, and were net buyers for the nineteenth straight quarter. Purchases by official sector institutions reached 175 tonnes, which almost matched the record highs in third-quarter 2014, as the net widened to include reports from countries such as China and the United Arab Emirates.

Total supply was marginally higher year-on-year — up 1% at 1,100 tonnes. Mine production contracted slightly and recycling declined in the third quarter, but this was more than offset by fresh producer hedging. Long-term, supply could stay constrained, as the mining industry proactively manages costs and optimizes its operational performance.