Demand for Gold Fell 19% in the Third Quarter Year-on-Year

Strong growth in global investment demand for gold in the third quarter of this year partially offset weakness elsewhere. The Covid-19 pandemic remained at the forefront of the global health and economic condition. 

According to the World Gold Council, demand for the precious metal fell to 892.3 tonnes in the third quarter, to its lowest since the same period in 2009. Consumers and investors continued to fight the effects of the global pandemic. With 2,972.1 in the first nine months this year, demand is 10% below the same period in 2019.

The demand for jewelry and precious metal industry, the purchase of investment coins or bullion improved from the record low in the second quarter. However, continued social constraints, the economic slowdown and a high gold price proved to be troublesome for many jewelry buyers.

Demand for investment coins and bullion strengthened

In contrast, demand for investment coins and bullion strengthened, increasing 49% year-on-year to 222.1 tonnes. Much of the growth occurred in official currencies, due to continued strong demand for safe havens in Western markets and Turkey, where currencies are the most frequent form of investment in gold. The third quarter also saw continued entries into gold-backed ETFs, but at a slower pace than in the first half. Investors globally added 272.5 tonnes to their holdings of these products.

Central banks generated small net sales of gold in these months, the first quarter of net sales since the fourth quarter of 2010. Sales were generated mainly by only two central banks, Uzbekistan and Turkey. Meanwhile, a handful of banks remained stable; however, they made small purchases.

Demand for gold applied in technology remained weak in the third quarter, falling 6% year-on-year to 76.7 tonnes. Yet the sector saw a decent quarterly improvement as some key markets emerged from the lockdown.

Total gold supply fell 3% year-on-year in the third quarter to 1,223.6 tonnes, despite a 6% growth in gold recycling. Besides, mining production is still feeling the effects of Covid-19 restrictions of the first semester.

While the pace slowed from the first half, sustained inflows in the third quarter demonstrated the motivation of investors globally to increase their holdings.

The retail investment was particularly strong in western markets, as well as China and Turkey, in contrast to continued sales in Thailand. 

The world gold council thinks that demand for jewelry in China and India is likely to rise. Besides, central banks should again be buyers of the precious metal since economic uncertainty is unlikely to change significantly any time soon.