November 12, 2015
Gold Demand Rises 8% In Third Quarter
(The Wall Street Journal)- Global gold demand rose 8% in the third quarter, boosted by buying from retail investors in key regions scooping up cheaper metal after it fell in price, said the World Gold Council Thursday.
Consumption of the precious metal was 1,120.9 metric tons between July and September this year, up from 1,041.9 tons during the same period in 2014, according to the industry body’s Gold Demand Trends report.
The extra buying, though, did little to buoy the price of gold which fell around 2% in that quarter. This market has been more influenced by speculation over when the next U.S. interest rate rise will come. Rate rises make gold less competitive against yield bearing securities, such as Treasury’s, while boosting the greenback and making this dollar-denominated commodity more expensive for most of its buyers.
Jewelry demand, which makes up more than 60% of total gold demand, was up 6% in the third quarter to 631.9 tons—it’s highest level for that quarter since 2008.
The spike higher followed a much weaker second quarter, with demand declining 12% to a six-year low between March and June.
“Back in July, investors’ expectations of an imminent increase in U.S interest rates grew stronger and institutional investors became a little bit more bearish towards gold,” said Alistair Hewitt, head of market intelligence at the London-based World Gold Council. “[But] what the report highlights is the strength of the consumer response.”
Gold prices at five-and-a-half-year lows in July and August, combined with fears of a rise in U.S. interest rates by the Federal Reserve, currency concerns in China and persistent concerns over the future of Greece within the Eurozone prompted buying.Global investment demand jumped 27% to 229.7 tons, compared to 180.7 tons the year before, driven by bar and coin consumption in the Asia, the U.S. and Europe.
Total bar and coin demand increased 33% to 295.7 tons, from 222.2 tons over the same time-frame in 2014.
In China, bar and coin demand shot up 70% to 52.3 tons, up from 30.8 tons in the third quarter last year. In India, bar and coin demand was up 6% at 57 tons, from 54 tons in 2014.
U.S. bar and coin demand rose 207% to 32.7 tons from 10.6 tons during the same period last year, while European bar and coin demand increased 35% to 60.9 tons, from 45.3 tons.
“It’s really confirmation that Indian and Chinese demand remains price-sensitive,” said Adrian Ash, head of research at BullionVault, an online bullion marketplace. The third quarter “has shown a decent rise because [gold] is at a lower price.”
Total demand from China and India, which had declined between March and June, rebounded higher on the back of lower gold prices in the third quarter. The two countries account for around half of global gold demand.
Analysts say that buyers in Asia are bargain-hunters and typically enter the market when prices have fallen significantly in order to pick up the metal more cheaply.
Demand was strongest in India, where the price of gold in rupees fell significantly which encouraged an unseasonal amount of buying.
Indian jewelry demand rose 15% to 211.1 tons in the third quarter, from 184.2 tons over the same period last year. Total demand increased 13% quarter-over-quarter to 268.1 tons, up from 238.2 tons in 2014.
In China, widespread marketing of China’s Valentine’s Day on August 20 as a gold-buying event also supported modest trade.
Chinese jewelry demand increased 4% in the third quarter to 187.6 tons, from 181.2 tons a year earlier. Overall demand for the precious metal was also up 13% in the third quarter.
Mr. Ash said that it was also to see that Western retail investment is showing a similar trend.
Global gold supply increased 1% year-on-year to 1,100.1 tons. Mine supply rose 3% to 847.8 tons, while recycled gold dropped 6% to 252.3 tons.
In the fourth quarter, religious festivals in India and buying in the run-up to next year’s Chinese New Year next year should support gold demand, said Mr. Hewitt.
Nevertheless, the World Gold Council said it is cautious on its outlook.
“After such an exceptional third quarter, it is worth sounding a note of caution for the fourth quarter,” said the WGC report.
According to the World Gold Council, its full-year gold demand forecast remains unchanged at between 4,200 tons and 4,300 tons. For China, its 2015 demand outlook is between 900 tons and 1000 tons. For India, its outlook for the year is between 850 tons and 950 tons.