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). 

Contributors

Louise Street, Krishan Gopaul, Mukesh Kumar, Carol Lu, Alistair Hewitt. Contact us: marketintelligence@gold.org

GDT Q3 2016 - infographic - India stalls

GDT Q3 2016 - infographic - Geopolitical risk

GDT Q3 2016 - infographic - ETP inflows