Global gold demand rose 28 percent year-on-year to 1,181 tonnes in the third quarter of 2022 as investors turned to the precious metal as a store of value amid rampant inflation and geopolitical uncertainty, the World Gold Council said.
Consumers and central banks boosted demand for gold in the three months to the end of September, despite a significant contraction in investment demand, the trade body said in its latest report.
Strong demand has pushed gold’s year-to-date to pre-Covid levels and is up 18 percent annually, the WGC said.
“Despite a volatile macroeconomic environment, this year’s demand reflects gold’s safe-haven status, outperforming most asset classes in 2022,” said Louise Street, senior market analyst at the World Gold Council.
“Looking ahead, we expect central bank buying and retail investment to remain strong and help offset potential declines in OTC [over-the-counter] and ETFs [exchange-traded fund] If the dollar continues to strengthen, the investment can be made.
Geopolitical and economic uncertainty is rising worldwide following Russia’s military offensive against Ukraine, with inflation also rising due to higher commodity prices and supply chain disruptions.
The International Monetary Fund cut its global growth forecast for 2023 and warned of a cost-of-living crisis as the global economy is affected by the war in Ukraine, widespread inflationary pressures and a slowdown in China.
The IMF maintained its global economic forecast for this year at 3.2 percent, but lowered its forecast for next year to 2.7 percent — 0.2 percentage points lower than the July estimate.
Gold investment fell 47 percent year-on-year as ETF investors responded to a stronger US dollar with higher interest rates and outflows of 227 tonnes, the WGC said.
However, investors sought to hedge against inflation by investing in gold bullion and coins, with overall retail demand up 36 percent year-on-year to 351 tonnes. This was supported by significant purchases in Turkey and Germany.
Weakness in OTC demand and negative sentiment in futures markets hampered gold price performance, contributing to an 8 percent quarterly decline in the price in the third quarter.
Meanwhile, according to the WGC, jewelery consumption has now reached its previous level of 523 tonnes, growing by 10 per cent annually.
Much of this growth was led by India, where urban consumers increased demand by 17 percent annually to 146 tonnes. Chinese jewelry demand also grew by 5 percent annually.
Jewelery demand across the Middle East benefited from lower gold prices in the quarter, while higher oil revenues and tourism also boosted demand in some markets.
Jewelery consumption in Saudi Arabia rose by 20 per cent compared to the same time last year, while the UAE grew by 30 per cent.
Demand in Turkey was 19 percent higher at 11 tons, the strongest quarterly total since the fourth quarter of 2017.
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“We expect jewelery demand to continue to be strong in certain regions such as India and South East Asia,” Ms Street said.
The central bank’s buying increased sharply in the third quarter with record purchases of nearly 400 tonnes. The top reported buyers include Turkey, Uzbekistan and Qatar.
Meanwhile, demand for industrial gold fell 2 per cent year-on-year to 77 tonnes due to weakening consumer confidence, the report said. Gold used in the electronics sector declined by 9 percent to 63 tonnes as consumer demand fell.
Higher inventory levels in the third quarter, US restrictions on China, falling capacity utilization and weak semiconductor guidance are likely to pressure gold demand in technology consumption in the fourth quarter, the report said.
Total gold supply rose 1 percent to 1,215 tonnes in the third quarter, as lower recycling reduced mine output growth. Mine output rose 2 percent, as gold mining saw its sixth consecutive quarter of growth, the WGC said.
In contrast, recycling fell 6 percent as consumers held on to their gold amid rising inflation and an uncertain economic outlook.
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Updated: November 02, 2022, 4:00 AM