The health of the third quarter has helped gold demand so far this year return to normal pre-pandemic levels, driven by increased consumer and central bank buying.
Gold demand (excluding OTC transactions) rose 28% year-on-year to 1,181 tonnes in the third quarter. Year-to-date demand is up 18% from the same period in 2021, returning to pre-pandemic levels.
Despite the deteriorating global economic backdrop, gold jewellery consumption reached 523 tonnes, an increase of 10% year-on-year. Demand for gold jewellery has held up slightly so far this year, up 2% to 1,454 tonnes.
Investment demand (excluding OTC transactions) fell 47% year-on-year to 124t in the third quarter, reflecting subdued sentiment in some investor sectors. The 36% increase in bar and coin investment (to 351t) was not enough to offset ETF outflows of 227t. Over-the-counter demand contracted sharply this quarter, echoing weak investor sentiment in the ETF and futures markets.
Central banks continue to hoard gold, with quarterly purchases estimated to be close to 400 tonnes. Gold demand in the tech sector fell 8% year-on-year, reflecting a slump in consumer demand for electronics due to a downturn in the global economy.
Total gold supply edged up (up 1% year-on-year) to 1,215 tonnes. Mine production increased year-over-year for the sixth consecutive quarter, partially offset by lower recycling levels.
Year-to-date gold demand returns to pre-pandemic growth rate
The LBMA gold price PM fell 8% in the third quarter. This was mostly in response to a stronger dollar as the Federal Reserve raised interest rates in response to high inflation. However, the average price of gold in the third quarter was only down 3% year over year, more closely matching the relative performance of demand (including OTC) and supply in the quarter.
Investment needs are divided by different priorities. Retail investors bought gold as a store of value amid soaring global inflation, while ETF investors cut their holdings amid rising global interest rates.
India has contributed significantly to the recovery of the global gold jewellery industry. Urban consumers were the engine of demand in India in the third quarter, encouraged by the return of economic activity to pre-pandemic levels. Rural consumers are more cautious because their inflation rate is outpacing urban consumers.
Retail demand in China stabilized as lockdown restrictions eased. Jewelry consumers benefited from a pullback in gold prices as lockdowns eased in major cities. Gold’s safe-haven appeal has encouraged retail investors.
Spot Gold Daily Chart
At 14:42 on November 1st, Beijing time, spot gold was reported at $1,643.48 per ounce.