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Gold Demand Charts Healthy Increase in Q3

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Gold demand rose 28% year-on-year in the third quarter, driven by robust consumer demand for physical gold and central bank buying, according to data released by the World Gold Council.

Year-to-date, demand is up 18% compared to the same period in 2021, a return to prepandemic levels.

As we’ve reported, demand for physical gold has been robust. According to the World Gold Council, gold bar and gold coin investment were up 36% in Q3. Total demand for the quarter came in at 351 tons. It was the strongest Q3 in the physical gold market since 2011.

According to the WGC, bar and coin demand in China almost doubled to 70 tons from the previous quarter’s COVID lockdown-induced slump.

India also saw a jump in demand with bar and coin sales increasing by about 6%. According to the World Gold Council, “At 45 tons, demand was 14% above the five-year quarterly average and took y-t-d demand to 117 tons, the highest Q1-Q3 total since 2015.”

Bar and coin investment demand in the US  also remained elevated. It was up 3% year-on-year.

Although demand was slightly softer compared with the previous quarter, it remained well above the 15t quarterly average over the last five years.”

The Middle East generated the highest level of quarterly retail investment in physical gold in four years, up 64% y-o-y to 26 tons.

But institutional investors who primarily buy and sell paper gold spurned the yellow metal in Q3. ETFs charted a 47% drop in gold holdings last quarter. It was the biggest outflow of metal from ETFs since 2013.

 Retail investors bought gold as a store of value amid surging global inflation, while ETF investors reduced their holdings in the face of rising global interest rates.”

Jewelry demand was strong in Q3, coming in at 523 tons. That was a 10% year-on-year increase despite what the WGC called a “deteriorating global economic backdrop.” Year-to-date, jewelry demand is up about 2% over the same period in 2021.

According to the World Gold Council, India generated much of the rebound in gold jewelry demand.

Urban consumers were the engine of Indian demand in Q3, encouraged by a return to pre-COVID levels of economic activity. Rural consumers were more cautious as their inflation outpaced that of their urban counterparts.”

Demand also firmed in China.

Retail investors were encouraged by gold’s safe-haven appeal amid a depreciating local currency and falling local equity prices.”

Central banks globally added about 400 tons of gold in the third quarter. That is a quarterly record, according to the WGC.  Year-to-date, net central bank gold purchases currently stand at 673 tons. That’s higher than any annual total since 1967.

Turkey, Uzbekistan, and Qatar were the biggest reported buyers during the quarter.

According to the World Gold Council, “The level of official sector demand in Q3 is the combination of steady reported purchases by central banks and a substantial estimate for unreported buying.”

Gold used in industrial applications fell by 8% to 77 tons year-on-year. It was the weakest third quarter on record. Falling consumer demand for electronics as the global economy slowed was the primary driver.

Despite increased demand, the dollar price of gold fell about 8% in Q3. This was primarily a function of dollar strength and higher interest rates.

You can read the entire World Gold Council Q3 Demand Trends Report HERE.

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