Global gold demand fell 9% in Q3, as ETF inflows and India slowed

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Global gold demand in the third quarter (July-September) of 2017 was 915 tonnes, a drop of 9% compared with the same period in 2016, according to the World Gold Council’s latest Gold Demand Trends report.

This decline was led by two key factors: a softer quarter in the jewellery sector and significantly lower inflows into exchange-traded funds (ETFs).

Global jewellery demand was down 3% year-on-year in Q3, as the newly introduced Goods & Services Tax and tighter anti-money laundering regulations around transactions in India deterred buyers.

Courtesy World Gold Council

While ETFs had another quarter of positive inflows, these fell far short of the remarkable 144 tonnes influx into the sector in Q3 2016. By contrast, demand from other sectors consolidated: central bank demand was healthy in Q3, up 25% year-on-year to 111 tonnes, while bar and coin investment strengthened by 17% to 222 tonnes, albeit from a low base.

A weak quarter in India was the main reason for the year-on-year decline in global demand, down from 495 tonnes in Q3 2016 to 479 tonnes in Q3 2017. Jewellery volumes continue to languish below longer-term average levels.

The new GST regime deterred consumers, as did new anti-money laundering regulations governing jewellery retail transactions.

Investors continued to favour gold’s risk-hedging properties, but the greater focus was on buoyant stock markets.

Global investment in bars and coins rose by 17%, from relatively weak year-earlier levels. Mainland investors in China bought on price dips, clocking up a fourth consecutive quarter of growth.

Russia and Turkey together added nearly 95 tonnes of gold to global official reserves. Strong demand for LEDs and continued growth in the use of 3D sensors in new smartphones boosted demand by 2%.

“It was a tough quarter for gold demand. India was coming to terms with GST and anti-money laundering regulations and, although we saw ETF inflows at 19 tonnes, they were significantly lower than last year. But there were some real bright spots: retail investment demand in China grew for the fourth consecutive quarter; the Turkish and Russian central banks added to gold reserves; and, after years of declines, we also saw increased use of gold in technology, supported by the demand for high-end smartphones,” said Alistair Hewitt, Head of Market Intelligence at the World Gold Council.

Mine production fell 1% year-on-year in Q3, which was also the fifth consecutive quarter of net de-hedging. Recycling activity continued to normalise after jumping in 2016.

Courtesy World Gold Council

The key findings included in the Gold Demand Trends Q3 2017 report are as follows:

  • Overall demand was 915t, a fall of 9% compared with 1,001t in Q3 2016
  • Total consumer demand rose by 2% to 701t, from 686t in the same period last year
  • Total investment demand fell 28% to 241t compared with 335t in Q3 2016
  • Global jewellery demand dropped 3% to 479t, from 495t in the same period last year
  • Central bank demand climbed 25% to 111t compared with 89t in Q3 2016
  • Demand in the technology sector increased 2% to 84t compared with 83t in Q3 2016
  • Total supply was down 2% to 1,146t, from 1,168t in the same period last year
  • Recycling fell 6% to 315t compared with 335t in Q3 2016

 

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He also advises companies on thought leadership imperatives.

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