Gold Demand Trends Q3 2016

Published

ETP inflows fail to offset weakness in other sectors.

Overview

Third quarter gold demand fell 10% to 992.8 tonnes (t). While this was the lowest quarter since Q2 2015, year-to-date demand is up 7%. Many of the themes present in H1 continued into Q3: Political and economic uncertainty continued to fuel ETF inflows, especially in Europe, while the sharp year-to-date price rise (+20%) continues to squeeze consumer demand, especially in Asian markets.  

Highlights

  • ETPs excel: ETPs were the only area of growth with inflows of 145.6t. Investors in Europe, faced with a busy, and potentially disruptive, political agenda in 2017, led demand in the sector. investors added significantly to their strategic holdings (+145.6t), although at a slightly slower pace than in H1. Year-to-date inflows total 651t. 
  • Bars, coins and jewellery were weak: year-to-date consumer demand fell 16%. Losses were price-driven, although for differing reasons: jewellery demand (down 21% to 580.1t) was hit by high gold prices, while bar and coin demand weakened (by 36% to 190.1t) due to a lack of price momentum.
  • India inert: consumer demand is still weak (at 194.8t, its lowest year-to-date level since 2009) as the market gets to grips with near-record prices, still-fragile rural sentiment and government regulation.
  • China falters: jewellery demand fell more than 20% (to 141.5t) in the third quarter. Elevated prices played a role, but changing consumer behaviour is an important longer term trend: younger consumers have a greater preference for 18k jewellery, rather than 24k. 
  • Central banks wane: While an additional 82 tonnes in third quarter brought central banks net purchases to 23 consecutive quarters, year-to-date purchases were the lowest since 2010 (271.1t). Central bank demand fell to its lowest quarterly level in six years.
  • Recycling rallies: high gold prices, combined with structural changes in some markets, pushed recycling to its highest level in four years (340.9t). 

GDT Q3 2016 - infographic - India stalls

GDT Q3 2016 - infographic - Geopolitical risk

GDT Q3 2016 - infographic - ETP inflows