Gold continues its journey from West to East as buoyant consumer markets balance investment outflows
Published 14 November, 2013
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The latest World Gold Council Gold Demand Trends report, which covers the period July-September 2013, highlights the resilience of the global gold market in what is traditionally a slower quarter for gold demand. The continued growth in consumer demand across the globe and the strength of Asian gold demand overall, reinforces the patterns first seen at the beginning of 2013, clear evidence of the self-balancing nature of the global market.
Overall demand for gold in Q3 2013 was 869 tonnes (t), down 21% on the same period a year ago. However, demand remained strong across most countries and sectors. The exceptions were gold-backed ETFs, which had net outflows of 119t this quarter, compared to 402t in Q2 2013, and India where the result of government intervention in the Indian gold market was to reduce demand by 71t this quarter.
Taking the year as a whole so far, the jewellery, bar and coin sectors are showing year-to-date increases, while technology demand remains robust. ETF investment demand is the notable exception, having weakened this year.
Consumer demand globally - the strength of jewellery and bar and coin demand in 2013 to date can be seen when compared against the first three quarters of previous years. As of the end of Q3 2013, demand stood at 2,896t, 26% higher than the same year-to-date figure in 2012.
Global demand for jewellery - far and away the largest component of global demand - was 487t in Q3 2013, compared with 462t in the same period last year, an increase of 5%. Demand was particularly strong in China, where the figure reached 164t, a rise of 29% compared to with the same period last year. Robust growth in the jewellery sector was also seen in the Middle East, Turkey and, significantly, across South East Asia, beyond China. After eight years of decline, the US jewellery market had its third consecutive quarter of growth with a shift to higher carat items – signalling the re-emergence of aspiration and luxury as key drivers of gold jewellery in the US.
Global bar and coin demand - also showed a year-on-year increase, reaching 304t, a rise of 6% compared to the same period last year. This takes overall investment in bars and coins so far this year to 1,252t, a rise of 36% compared to the first three quarters of 2012.
Marcus Grubb, Managing Director, Investment at the World Gold Council commented: “Consistent with the first two quarters of 2013, the global gold market remains resilient, underpinned by the continued shift in demand from West to East, strong demand in consumer categories and solid central bank and technology sectors”.
”The growth we are seeing in jewellery, bars and coins in particular, demonstrates once again the unique diversity of gold demand, as different sectors increase in prominence at different points in the global economic cycle, clear evidence of the ebb and flow of what is an extremely liquid market.”
The restrictions introduced by the Indian government on importing gold through official channels had the intended effect of substantially supressing demand, with total gold consumption in India standing at 148t in Q3, compared to 310t in Q2 of this year. However, the strength of Indian demand in the first half of the year means that full year consumer demand is still on track to narrowly exceed the 2012 total. One side effect of this was that while global recycling of gold fell 11% compared to the same quarter in 2012, in India the recycling figure increased more than fivefold to 61t.
“The intervention of the Indian government in restricting gold imports to the country is obviously reflected in the official levels of demand this quarter, but this by no means indicates that the appetite for gold in India is waning. We have seen some increases in demand in other countries which have close links with India, some of which may be making its way back to the country through illicit channels, which have reopened in recent quarters following a long period of inactivity.” Marcus Grubb continued.
For the 11th consecutive quarter, central banks were net buyers of gold, purchasing 93t. Meanwhile demand in the technology sector was stable, at 103t.
The average gold price for the quarter was US$1,326/oz, down 20% on the same quarter last year. In value terms, gold demand in Q3 2013 was US$37bn, down 37% compared to Q3 2012.
The key findings of the report are as follows:
- Continued consumer growth in China. Total consumer demand was 210t in Q3 2013, a rise of 18% compared to the same period last year.
- Jewellery consumption in South East Asia, outside China, was also strong. Hong Kong was up 28%, Vietnam up 14%, Thailand up 57% and Indonesia up 19% on the same quarter last year albeit off low bases.
- Jewellery growth in the rest of the world. Similarly, demand in the Middle East is up 9% for Q3 against last year and the US was up by 14%
- Government regulations in India are dampening demand figures. India recorded a 32% decline in consumer demand compared to the same quarter last year. However year to date, demand remains robust, up 19% compared to the first three quarters of 2012, following the surge in demand sparked by two price falls earlier in 2013
- Central banks continue to be strong buyers of gold, albeit at a slower rate. Q3 2013 was the 11th consecutive quarter of net purchases of gold
Gold demand and supply statistics for Q3 2013
- Third quarter gold demand of 869t was 21% lower than Q3 2012; this is due primarily to the Indian government intervention in their domestic market, and the year-on-year fall in ETF investment.
- Average price of gold in this quarter was US$1,326/oz, down 20% on Q3 2012
- Global demand for jewellery was 487t in the quarter, up 5% on last year. US jewellery demand increased by 14% - the highest third quarter jewellery demand figure since Q3 2009
- Investment in bar and coins saw robust demand, up 6% year on year to 304t
- There was a net outflow from ETFs of 119t, as investors adjusted their portfolios
- Net central bank purchases totalled 93t, 17% down on Q3 2012. Central banks have now been net purchasers of gold for 11 consecutive quarters
- Demand in the technology sector was stable once again, totalling 103t, a rise of 1% on the same period last year
- Total supply is 1,146t.
The Q3 2013 Gold Demand Trends report can be viewed at http://www.gold.org/download/latest/gold_demand_trends/ and on our investment iPad app which can be downloaded from www.itunes.com, and a video can be seen here.
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World Gold Council
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Note to editors:
*The World Gold Council defines consumer demand as the sum figure of bar, coin and jewellery demand.