Gold demand remains strong due to central bank purchases says report

The World Gold Council has released its third-quarter report for this year, indicating a continued strong demand for gold. The council’s data reveals that central bank purchases have been instrumental in maintaining this demand.

The report shows that gold demand, excluding over-the-counter (OTC) transactions, reached 1,147 tonnes for the quarter. This figure is 8% higher than the five-year average. When OTC and stock flows are included, the total demand increases by 6% year-on-year to 1,267 tonnes.

Central banks’ net buying for the quarter was the third highest ever recorded, at 337 tonnes. Despite not surpassing the record set in the same period the previous year, the year-to-date gold demand has already reached 800 tonnes.

The report suggests that this strong buying trend from central banks is likely to continue for the rest of the year, indicating a healthy annual total.

Investment demand for the quarter stood at 157 tonnes, marking a 56% increase year-on-year. However, compared to the five-year average, this figure is relatively weak. The decline in bar and coin investment in Europe has contributed to this weakness. Nevertheless, at 296 tonnes, the gold demand is higher than in the previous quarter and significantly above the five-year average.

Gold exchange-traded funds experienced continued outflows in the third quarter. This trend is largely attributed to investors’ expectations of sustained high interest rates.

Despite this, the strength in OTC investment persisted, reaching 120 tonnes in the third quarter. This was partly driven by high net worth demand in Turkey and stock building in other markets.

Jewellery demand remained stable despite high gold prices. However, there was a slight 2% year-on-year decrease to 516 tonnes in jewellery consumption, attributed to cost of living pressures on consumers in various global markets.

In terms of supply, the total gold available rose 6% year-on-year for the period, with mine production reaching a year-to-date record of 2,744 tonnes. The consistently high gold price has also led to a rise in recycling, with 289 tonnes recorded, an 8% increase year-on-year, reported Bangkok Post.

Louise Street, the senior markets analyst at the council, commented on the resilience of gold demand throughout the year.

“Gold demand has been resilient throughout this year, performing well against the headwinds of high-interest rates and a strong US dollar. Looking forward, gold demand may surprise to the upside.”

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