Surge in ETF inflows supports Q3 gold demand growth

Gold demand grew modestly to 1,107.9t in Q3 thanks to the largest ETF inflows since Q1 2016.

A surge in ETF inflows (258t) outweighed weakness elsewhere in the market to nudge gold demand 3% higher in Q3. Although central bank buying remained healthy, it was significantly lower than the record levels of Q3 2018. Jewellery demand (-16%) was hampered by the continued strength in the gold price, which hit new multi-year– and, in some cases, record –highs, as well as by consumer concern over the health of the global economy. Similarly, the decline in bar and coin demand (-50%) in Q3 was driven primarily by the gold price: retail investors took the opportunity to lock in profits rather than making fresh purchases. Technology demand for gold fell 4% as economic challenges remained, but the nascent 5G infrastructure helped to slow the decline in the important electronics sector. With mine production virtually unchanged, a price-related 10% jump in gold recycling boosted gold supply 4% to 1,222t.

 

Gold demand boosted as surge in ETF inflows outweighed weakness elsewhere

Gold demand boosted by surge in ETF inflows outweighing weakness elsewhere

Sources: Metals Focus, World Gold Council; Disclaimer

Download

Holdings grew by 258t in Q3, the highest level of quarterly inflows since Q1 2016. Accommodative monetary policies, along with safe-haven and momentum buying, drove demand.

Download

The -38% y-o-y comparison was in part because Q3 2018 saw record quarterly net purchases. Year-to-date, central banks have purchased 547t on a net basis, 12% higher y‑o‑y.

Download

Weak consumer sentiment - due to continued geopolitical and economic uncertainty - coupled with substantially higher gold prices dented jewellery purchase in all major markets.

Gold-backed ETF holdings hit a new record of 2,855t. image
Central banks added 156t to reserves in Q3. image
Jewellery demand was down 16% to 461t in Q3 image

Highlights

Holdings in gold-backed ETFs hit a new all-time high of 2,855.3t in Q3. Holdings grew by 258.2t during the quarter, the highest level of quarterly inflows since Q1 2016. Accommodative monetary policies, along with safe-haven and momentum buying, drove demand.

Central banks added 156.2t to reserves in Q3. The -38% y-o-y decline was partly due to Q3 2018 being the highest quarter of net buying in our records. Y-t-d, central banks have purchased 547.5t on a net basis, 12% higher y-o-y.

Jewellery demand was down 16% to 460.9t in Q3. Weak consumer sentiment due to continued geopolitical and economic uncertainty, coupled with substantially higher gold prices, dented jewellery purchases in all major markets.

Bar and coin investment halved in Q3 to 150.3t. Higher gold prices across many key currencies were the main cause of the decline to a multi-year low, as retail investors across the globe opted to defer purchases and lock in profits.

Gold supply rose 4% in Q3 to 1,222.3t. Growth was driven by a 10% increase in recycling – to its highest level since Q1 2016 – as the ongoing price rally continued to encourage selling back by consumers. Mine production of 877.8t was virtually unchanged y-o-y.

The gold price continued to rally, reaching new multi-year highs. The gold price rose by 5% during Q3, finding sustained support around US$1,500/oz. The primary factors behind this price momentum continued to be ongoing geopolitical tensions, concerns of a slowdown in economic growth, lower interest rates and the level of negative yielding debt.

Disclaimer [+]Disclaimer [-]