Gold demand down as ETF outflows outweigh strength in other sectors

In the third quarter of 2021 demand for gold* fell 7% year-on-year and 13% quarter-on-quarter to 831t, primarily due to outflows from gold-backed exchange-traded funds (gold ETFs), according to the World Gold Council’s latest Gold Demand Trends report.

Net gold ETF sales were relatively small (27t), but when compared to the pandemic-induced buying surge of a year earlier, this was enough to place overall gold demand into a year-on-year decline, despite demand increasing in all other sectors. 

Consumer purchases of gold jewellery** increased 33% y-o-y to 443t. Meanwhile bars and coins – a category of physical gold products overwhelmingly bought by retail investors*** – saw a fifth consecutive quarter of year-on-year gains, with 262t purchased in Q3. Gold used in technology grew 9% y-o-y, and central banks added 69t to their reserves.

The gold price averaged US$1,790/oz throughout the quarter – down from Q3 2020’s all-time USD high, but above its 3yr, 5yr and 10yr averages.

Louise Street, Senior Markets Analyst at the World Gold Council, said: “The relatively modest outflows from gold ETFs have had a disproportionate effect on this year’s figures, outweighing positivity almost everywhere else across the board.

“The outflows themselves are part of a bigger picture. A year ago, investors were flocking to gold, seeking a hedge against the pandemic. And gold ETFs were particular beneficiaries of these flows, adding more than 1,000 tonnes over the first three quarters of 2020. So, while there has been selling by gold ETF investors this year, the outflows have been modest in comparison.

“The rest of the gold market is seeing positive news – not least the strong growth in jewellery and technology demand, especially pleasing because they are at least partially consequences of an overall global economic recovery. Likewise, central banks remain net buyers, and bar and coin investment is growing.

“Looking forward, we expect the full-year picture for gold demand to look very similar: strong consumer and central bank will mitigate losses from ETFs. Jewellery demand will continue to exceed last year’s levels, but investment demand in total will be weaker in 2021, despite healthy bar and coin demand.”

Key findings included in the latest Gold Demand Trends report for Q3 2021 include:

  • Overall demand (excluding OTC) declined in Q3 by 7% year-on-year and 13% quarter-on-quarter to 831t
  • ETFs observed modest outflows totalling -27t while overall holdings remained high (3,592t)
  • Bar and coin demand was at 262t, an increase of 18% y-o-y and 8% q-o-q.
  • US dollar gold price averaged US$1,789.5/oz, 6% lower than Q3’20 (which experienced record high prices) and 1% lower than the preceding quarter.
  • Global jewellery demand improved to 443t. increasing 33% year-on-year. China, India and the Middle East drove this growth, although Western markets also began to recover. 
  • Central banks were net buyers of 69t, taking YTD purchases close to 400t and meaning eventual 2021 aggregate demand will likely be in the region of the five-year average. Brazil, Uzbekistan and India were key players in the market.
  • Demand in the technology sector recovered to pre-pandemic levels and was 9% higher y-o-y at 84t, and 4% higher q-on-q.
  • Total supply 3% lower y-o-y at 1,239t despite mine production rising to the highest quarter on record. The y-o-y drop was due to a sharp fall in recycling in response to lower gold prices.

ENDS
The Gold Demand Trends Q3 2021 report, which includes comprehensive data provided by Metals Focus, can be viewed here.
 

You can follow the World Gold Council on Twitter at @goldcouncil and Like on Facebook.

Notes to editors:

*Figure is based on all available sources of data, but excludes some areas for which data in not available, such as parts of the “over the counter” market. For full details on methodology see https://www.gold.org/download/file/8256/supply-and-demand-data-methodology-note.pdf

**Figure refers to end-user demand for all newly-made carat jewellery and gold watches, whether plain gold or combined with other materials. Excluded are: second-hand jewellery; other metals plated with gold; coins and bars used as jewellery; and purchases funded by the trading-in of existing carat gold jewellery.

*** The term “bar and coin” refers to investment by individuals in small (1kg and below) gold bars, and investment by individuals in gold bullion coins.

For further information please contact:

Damian Kerr
World Gold Council
T +44 20 7826 4767
[email protected]

George Peele
Instinctif Partners
T:  +44 75 1753 9427
E:  [email protected]

Note to editors:

World Gold Council

The World Gold Council is the market development organisation for the gold industry. Our purpose is to stimulate and sustain demand for gold, provide industry leadership and be the global authority on the gold market. 

We develop gold-backed solutions, services and products, based on authoritative market insight and we work with a range of partners to put our ideas into action. As a result, we create structural shifts in demand for gold across key market sectors. We provide insights into the international gold markets, helping people to understand the wealth preservation qualities of gold and its role in meeting the social and environmental needs of society. 

The membership of the World Gold Council includes the world’s leading and most forward-thinking gold mining companies.