Central bank gold demand in the third quarter of this year fell short compared to the same period last year, but year-to-date demand reached a new record of 800 tons. Central banks have continued their historic pace of gold buying, driven by economic conditions and gold’s status as a safe haven.
The World Gold Council (WGC) noted that net central bank purchases of 337 tons in the third quarter were the third strongest in its data series, even though they didn’t match the exceptional 459 tons added in the same period last year. However, demand from central banks in the year-to-date is 14% ahead of the same period last year, setting a record at 800 tons. Central bank net buying of gold is, so far, 14% ahead of 2022. While some central banks are regular buyers, many countries have broad-based increases in their gold reserves over recent quarters.
In the third quarter, overall gold demand was 8% higher compared to the five-year average but 6% weaker year-on-year at 1,147 tons. When including over-the-counter (OTC) purchases and stock flows, total gold demand was up 6% year-on-year at 1,267 tons.
Despite higher investment demand for gold in the third quarter, up 56% year-on-year at 157 tons, it was weaker than the five-year average of 315 tons. Global gold exchange-traded funds (ETFs) saw a decline of 139 tons in the third quarter, compared to an outflow of 244 tons in the same period last year.
Krish Gopaul, WGC Senior Analyst for Europe, the Middle East, and Africa, explained that gold ETF investors appeared to be influenced by central bank monetary policy and interest rate trends. Expectations of higher rates from the European Central Bank and the Bank of England, as well as a strong performance by the U.S. economy and a robust dollar, led to ETF outflows.
Investment in gold bars and coins decreased by 14% year-on-year to 296 tons in the third quarter, primarily due to sharp drops in Europe but remaining above the five-year quarterly average of 267 tons. OTC investment totaled 120 tons in the third quarter despite ETF outflows and falling Comex futures net longs.
Jewelry consumption softened in the third quarter, down 2% year-on-year to 516 tons, as gold prices remained high. Demand for gold in consumer electronics also fell by 3% year-on-year to 75 tons during the period.
The average London Bullion Market Association gold price during the third quarter was $1,928 per ounce, a 12% increase compared to the same quarter last year. Several countries experienced higher local gold prices due to currency weakness against the U.S. dollar.
Looking ahead, the WGC anticipates continued turbulence in the gold market driven by factors such as macroeconomic conditions and geopolitical tensions. While ETF and futures investors have shown little appetite for gold recently, underlying support for the precious metal remains, with potential for segments like ETFs and futures to return to net inflows in the fourth quarter.
The WGC expects total investment in gold, including OTC purchases, to increase year-on-year for the full year, with central bank buying poised to exceed last year’s levels. Gold bar and coin demand in China and India may continue to remain strong, driven by different factors such as safe-haven demand and wealth-driven buying, respectively.
Despite high gold prices and cost of living pressures, jewelry demand held up well in the year-to-date and is expected to continue during the typically busy fourth quarter for gold jewelry demand.
In summary, while the gold market faces ongoing challenges, it continues to be influenced by a complex interplay of economic, geopolitical, and market factors, with opportunities and challenges in various segments of the industry.
Source: [Mining Weekly]
