The World Gold Council published data on Gold demand in the third quarter this week. Taking into account over-the-counter (OTC) transactions, demand rose by 5% year-on-year, reaching a record level for a third quarter. The increase in demand was mainly driven by Gold ETFs, which recorded inflows for the first time in 10 quarters. As a result, investment demand more than doubled in comparison to the same quarter last year, although purchases of bars and coins were lower. By contrast, jewellery demand fell to its lowest level in a third quarter since 2000, except for the pandemic year 2020, Commerzbank’s Commodity analyst Carsten Fritsch notes.

Investment demand doubles compared to the same quarter last year

“In the first three quarters, demand for Gold, including OTC transactions, was 3% above the previous year's level. Investment demand exceeded the figure for the previous year despite somewhat lower purchases of bars and coins, because Gold ETFs recorded significantly fewer outflows. Jewellery demand and central bank Gold purchases were down year-on-year after three quarters. However, the latter are on a par with 2022, which ended with a record level. For the year as a whole, the WGC expects investment demand to be higher than in the previous year.”

“ETFs should see further inflows due to the expected interest rate cuts, high fiscal deficits and the highly valued stock markets. However, investment demand in the fourth quarter could be heavily influenced by the outcome of the US elections. The central bank's Gold purchases are likely to be strong again this year, but not at the levels seen in the previous two years. Jewellery demand is also expected to be lower than in the previous year, albeit somewhat higher than previously expected by the WGC.”

“The data did not provide a feasible explanation for the 15% rise in the Gold price in the third quarter. Rather, they showed that demand for Gold was curbed by the rising price level. This applies in particular to jewellery demand and also to Gold purchases by central banks. The increase in Gold demand in India was due to the reduction of the import tax and is therefore unlikely to be repeated. Excluding the less transparent OTC transactions, demand for Gold in the first three quarters was 3% below the previous year's level. Only the Gold ETFs provided positive impetus for demand. In the long term, this alone will hardly be enough to justify the high price level, let alone a further price increase.”
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