Gold demand drops to over eleven percent
In this year’s third quarter the world gold demand dropped to over eleven percent. Last Thursday, the World Gold Council said that China’s lower consumption and a sharp decline in investors’ appetite for gold bars and coins influenced the drop.
In the most recent Gold Demand Trends report, it stated that the demand for gold during the third quarter amounted to 1,084.6 metric tons as compared to 2011’s 1,223.5 tons. In dollars, this equates to about $57.6 billion and when compared to 2011, it has declined for about fourteen percent.
The WGC stated that the most important factor in the demand drop was a decline of sixteen percent in demand for investment of gold to 429.9 tons. This was influenced by a huge drop for gold coins and bars which declined to thirty percent to 293.9 tons.
Based on the WGC, this drop was “largely a reflection of the strength of demand in 3Q 2011, a period of exceptional investment inflows.”
It also stated that another factor was a weaker Chinese demand. In this year’s third quarter, the consumption of gold lowered down to eight percent to 176.8% which was led by a six percent and twelve percent decline in both investment and jewelry demand.
WGC’s managing director of investment, Marcus Grubb, said that the decrease in Chinese demand during the previous quarter has surprised them and he said it was “very much a reflection of the Chinese economy slowing down.”
However, the demand for Indian gold suddenly improved during the 3rd quarter increasing from nine percent to 223.1 tons.
The largest gold consumers are China and India and when combined, they account for 37 percent of the world’s consumption of gold.
Another spot that showed potential during the 3rd quarter was the Exchange-traded fund demand. It soared for 56 percent to 136 tons.
One of the 3rd quarter’s bright spot was the exchange-traded fund demand that soared 56 percent to 136 tons. Mr. Grubb said that this ws possibly because of the rising interest by the private wealth sector in alternative investment vehicles.
He also said that “Large investors are still very concerned about the world economy and financial system,”
Usually, people treat Gold as a traditional “safe heaven” since it holds a value better that all of those assets available during periods of unstable economy.
The official sector gold demand tumbled 31 percent to 97.6 tons and this already included purchasing from central banks. However, from a historical point of view, the necessity over the year’s first 3 quarters was still over the one in 2011 since the central bank’s necessity for gold still stays tough.
Mr. Grubb stated that this year, the WGC is still expecting the official sector gold necessity to sum up between 450 to 500 tons. In the past year, the official sector purchased 457 tons of gold.
In this year’s 3rd quarter, the global jewelry demand decreased to 2 percent to 448.8 tons. The technology sector’s necessity for metal fell 6 percent 108.2 tons.
Year-on-year, the market’s gold supply went down. The third quarter’s total gold supply fell 2 percent to 1,188.3 tons while the production of mine decreased to 1 percent to 731.6 tons.