Investment
30 October, 2024
- Investment demand (gold ETFs, bars and coins) more than doubled y/y to 364t as gold’s price rally, along with rate cuts and continued geopolitical turbulence, prompted Western ETF investors finally to pick up the baton
- A sharp swing to notable inflows into global gold ETFs was a key driver of total gold demand in Q3, along with the continued presence of strong OTC investment
- Bar and coin investment trailed behind, thanks to a sharp drop in a handful of key markets.
| Tonnes | Q3'23 | Q3'24 | Year-on-year % change |
|
| Investment | 156.8 | 364.1 | 132 |
|
| Bar & Coin | 295.9 | 269.4 | -9 |
|
| India | 54.5 | 76.7 | 41 |
|
| China, P.R.: Mainland | 81.6 | 62.1 | -24 |
|
| Gold-backed ETFs | -139.1 | 94.6 | - | - |
Total gold investment demand in Q3 more than doubled from year-earlier levels, posting its strongest quarter since Q1’22, when Russia’s invasion of Ukraine fuelled a surge of safe-haven inflows into gold ETFs. The turnaround in global ETF demand was equally pivotal in the latest quarter. Western-listed funds witnessed a turnaround during the quarter, with US funds now positive y-t-d.
Bar and coin investment was in step with the previous quarter, but didn’t match year-earlier levels, largely due to investment coming off the boil in China and Turkey. A stellar quarter in India provided some counterbalance.
Professional and institutional investors seemed to suffer a case of FOMO – ‘fear of missing out’ – as gold’s performance repeatedly hit the headlines. The ‘OTC investment and other’ category captures flows in the over-the-counter market, which has been increasingly influenced by demand from high-net-worth investors seeking to hedge geopolitical risk and economic risks. The price performance in recent quarters has added fuel to this.
While OTC demand is not directly observable, positioning of speculative investors in the US futures market can be used as a proxy for identifying trends. Net long positions held by money managers continued to rise throughout the quarter, although they remain below the prior highs reached in 2019.
ETFs
Global physically-backed gold ETFs halted their nine-quarter run of outflows, with 95t of inflows in Q3. All regions saw positive inflows during the quarter, which ended with collective holdings of 3,200t. The third quarter reversed much of the first half weakness and y-t-d holdings are now just 25t lower. In US dollar terms, global assets under management (AUM) are US$271bn and y-t-d flows flipped to positive, at US$389mn. For a detailed review of regional gold-backed ETF flows during the quarter, please see our ETF Flows commentary.
Table 3: Total bar and coin demand in selected countries, tonnes
| Q3'23 | Q4'23 | Q1'24 | Q2'24 | Q3'24 | Quarter-on-quarter % change |
Year-on-year % change |
|
| India | 54.5 | 66.7 | 43.6 | 43.1 | 76.7 | 78 | 41 |
| Pakistan | 5.9 | 5.3 | 4.8 | 4.5 | 4.1 | -10 | -31 |
| Sri Lanka | - | - | - | - | - | - | - |
| Greater China | 83.1 | 85.0 | 113.5 | 82.2 | 63.9 | -22 | -23 |
| China, P.R.: Mainland | 81.6 | 82.7 | 110.5 | 80.0 | 62.1 | -22 | -24 |
| Hong Kong SAR | 0.3 | 0.3 | 0.5 | 0.4 | 0.3 | -17 | -15 |
| Taiwan Province of China | 1.1 | 2.0 | 2.5 | 1.8 | 1.4 | -22 | 28 |
| Japan | -0.2 | -1.3 | -1.0 | 4.0 | 0.1 | -97 | - |
| Indonesia | 6.7 | 4.3 | 6.6 | 4.5 | 7.3 | 64 | 10 |
| Malaysia | 1.1 | 1.6 | 1.8 | 1.3 | 1.3 | -2 | 20 |
| Singapore | 1.1 | 1.6 | 1.8 | 1.6 | 1.2 | -24 | 12 |
| Korea, Republic of | 3.1 | 4.6 | 5.1 | 4.1 | 4.2 | 3 | 36 |
| Thailand | 10.5 | 12.1 | 5.9 | 7.2 | 12.1 | 67 | 15 |
| Vietnam | 8.8 | 9.9 | 14.1 | 11.8 | 7.9 | -33 | -10 |
| Australia | 2.6 | 3.0 | 2.2 | 2.9 | 2.8 | -4 | 8 |
| Middle East | 27.6 | 24.5 | 27.2 | 29.4 | 24.3 | -17 | -12 |
| Saudi Arabia | 3.6 | 3.6 | 3.8 | 3.9 | 3.3 | -15 | -8 |
| UAE | 3.4 | 3.1 | 3.0 | 3.3 | 3.6 | 9 | 5 |
| Kuwait | 1.5 | 1.3 | 1.5 | 1.6 | 1.6 | 0 | 5 |
| Egypt | 6.3 | 5.5 | 5.2 | 7.6 | 5.3 | -30 | -16 |
| Islamic Republic of Iran | 10.4 | 8.9 | 11.5 | 10.9 | 8.5 | -22 | -18 |
| Other Middle East | 2.3 | 2.2 | 2.2 | 2.1 | 2.0 | -3 | -13 |
| Turkey | 28.4 | 29.6 | 45.3 | 30.8 | 12.7 | -59 | -55 |
| Russian Federation | 8.5 | 7.5 | 7.4 | 8.9 | 9.1 | 2 | 7 |
| Americas | 25.2 | 28.4 | 22.5 | 21.1 | 21.9 | 4 | -13 |
| United States | 22.8 | 25.9 | 20.1 | 18.9 | 19.9 | 5 | -13 |
| Canada | 1.7 | 1.7 | 1.6 | 1.7 | 1.4 | -17 | -18 |
| Mexico | 0.2 | 0.3 | 0.3 | 0.2 | 0.2 | 9 | -28 |
| Brazil | 0.4 | 0.5 | 0.4 | 0.4 | 0.4 | 5 | 2 |
| Europe ex CIS | 31.2 | 30.2 | 14.3 | 11.1 | 18.1 | 63 | -42 |
| France | 0.6 | -0.4 | -1.2 | -0.6 | -0.3 | -55 | - |
| Germany | 11.5 | 11.3 | 6.6 | -2.0 | 3.5 | -275 | -70 |
| Italy | - | - | - | - | - | - | - |
| Spain | - | - | - | - | - | - | - |
| United Kingdom | 3.0 | 2.1 | 2.0 | 2.6 | 3.5 | 32 | 15 |
| Switzerland | 8.0 | 8.8 | 1.4 | 5.1 | 5.0 | -2 | -38 |
| Austria | 0.9 | 1.1 | 0.2 | 0.5 | 0.6 | 5 | -35 |
| Other Europe | 7.2 | 7.3 | 5.2 | 5.5 | 5.8 | 7 | -19 |
| Total above | 298.0 | 313.0 | 315.0 | 268.6 | 267.7 | -0 | -10 |
| Other & stock change | -2.1 | 2.0 | 1.7 | 4.6 | 1.8 | -62 | - |
| World total | 295.9 | 315.0 | 316.7 | 273.2 | 269.4 | -1 | -9 |
Source: Metals Focus, Refinitiv GFMS, ICE Benchmark Administration, World Gold Council
Bar and coin
While broadly stable q/q, bar and coin investment was notably weaker compared with Q3’23. China, Turkey and Europe were the main contributors to the y/y slowdown, outweighing growth in India and several of the smaller markets in Asia.
Global y-t-d demand at 859t is broadly in line with the same period of the last four years. In value terms, however, it has reached a record for the first three quarters of US$63bn.
It is important to note that, similar to last quarter, Western investors continued to show strong interest in gold, but this has been countered by heightened selling interest as the price reached record levels, resulting in far lower net levels of demand.
China
After a very strong first half in China, bar and coin investment lost momentum in Q3. But the y/y comparison is with a very strong base period, which somewhat exaggerates the decline; demand remains healthy in comparison with longer-term levels and y-t-d investment is the strongest since 2013.
Among the headwinds facing Chinese bar and coin investors in the third quarter was a sizable appreciation in the domestic currency, which took the heat out of safe-haven demand and reduced the need for currency hedges. Furthermore, the recent pause in gold buying announced by the PBoC also likely curbed investment to some degree. More notable was the boost to investor risk appetite late in the quarter from the government’s announcement of a strong economic stimulus package, which focused attention on the rallying local equity market and improved confidence in properties, stealing some of gold’s thunder.
Looking ahead, we anticipate a modest pick-up in Q4. Further likely local rate reductions and a possible uplift to economic growth from the government’s stimulus should bode well for bar and coin purchases in coming quarters. And should the gold price continue to rally, investor interest would likely remain elevated.
But we remain cautious about the size of the rebound. Elevated investor risk appetite may continue to divert investors away from gold. Continued strength in the local currency would likely impede hedging demand for gold. And if measures to revive the property sector start to gain traction, real estate investment would also compete with gold.
India
Bar and coin demand in India jumped to its highest third quarter since 2012. Investor optimism and bullish price expectations were accelerated by the July duty-led price correction, which allowed many investors to enter the market.
Mirroring jewellery demand, retail investment was strongest in the weeks initially following the duty cut before slowing in September as prices surged and the inauspicious Shradh period began.
An element of investment demand came from consumers who planned to purchase gold during the Q4/Q1 wedding and festive season, and instead bought gold bars to lock in the gold price, intending to exchange them for jewellery at a later date.
Demand remains solid in the fourth quarter, although with the continued rise in the gold price offsetting the impact of the duty cut, we may see an increased trend for investors to wait for price corrections as opportunities to add to their holdings. Nevertheless, India is on course for a very strong year, as y-t-d investment is already approaching the annual totals of the past four years.
US and Europe
Western investment in bars and coins again came in well below year-earlier levels, reflecting continued tension between profit-taking on the one hand and fresh investment on the other.
Bar and coin investment in the US saw its third consecutive quarterly y/y drop, although the pace of decline slowed markedly. The surging gold price continues to have a dual effect, with some investors attracted into the market by the strong returns seen over the year so far, while others choose to take advantage of the higher prices by selling back some of their holdings.
Underlying demand remains healthy, and significantly higher than typical pre-pandemic levels, with continued support from gold bar and coin sales across Costco’s retail network.
European investment, while sharply lower y/y, saw its first quarterly improvement since the beginning of 2023, when levels of selling back started to surge.
Liquidations in Germany slowed during the quarter, likely as many investors who wanted to realise their gains on gold have already done so and as some now choose to wait in expectation of further gold price gains. Renewed interest in gold buying picked up late in the quarter, most likely as successive record high gold prices fuelled increasingly bullish price expectations.
But demand continues to face headwinds of high interest rates and very high gold prices creating affordability challenges amid the continued cost-of-living squeeze.
Middle East and Turkey
Although relatively healthy compared with longer-term average levels, Turkish bar and coin investment in Q3 appears weak in the context of the last eight exceptionally strong quarters.
Gold demand remained under pressure as high domestic interest rates have increased the relative appeal of savings accounts. Local gold premiums fell sharply in line with demand, before recovering towards the end of the quarter as the rocketing gold price and rising regional geopolitical tensions prompted a resurgence of interest in gold bars and coins.
Investment demand across the Middle East, while healthy compared with longer-term average levels, was down compared with the relatively strong Q3’23.
The regional decline concealed a y/y improvement in the UAE, where rising regional tensions and bullish price expectations encouraged investment.
Egypt and Iran both underperformed the wider region. Economic conditions in Egypt left consumers with little surplus income to invest. While in Iran, consumers directed their income towards discretionary spending rather than gold investment.
ASEAN markets
Global geopolitical tensions, local political and economic concerns and bullish price expectations buoyed ASEAN investor’s appetite for gold in Q3. Thailand, Indonesia and Malaysia all recorded double-digit y/y growth. Contrastingly, Vietnam was the outlier: demand slumped as the sharp price rise deterred fresh buying.
Rest of Asia
Following an upward revision to the Q2 figure, Japan’s gold investment market was almost perfectly in balance in Q3. Strong net buying interest earlier in the quarter was replaced by selling during September, perhaps related to currency moves, which saw the local price correcting lower in July/August before resuming its sharp uptrend later in the quarter.
Safe-haven motives boosted South Korean bar and coin buying, although the extent of the gold price rally prompted some caution.
Australia
Bar and coin investment in Australia remained in the 2-3t range of the last six quarters, albeit at the top of that range. The price action is likely to have encouraged a combination of fresh investment and profit-taking.
