Support for gold continues as central banks maintain historic buying in Q3: World Gold Council report

The World Gold Council’s Q3 Gold Demand Trends report revealed that support for the asset continues as central bank buying maintains a historic pace, bringing quarterly gold demand (excluding OTC) to 1,147 tonnes, 8% higher than its five-year average. 

According to the World Gold Council’s data series, central banks saw the third strongest quarter of net buying, reaching 337 tonnes. Although shy of breaking the Q3 2022 record, year-to-date demand has reached 800 tonnes, a new record for our data series. This strong buying streak from central banks is expected to stay on course for the remainder of the year, indicating a robust annual total again in 2023. 

Investment demand over the quarter stood at 157 tonnes, a 56% increase year-on-year but weak compared to the five-year average. Falling demand in Europe weighed down Q3 bar and coin investment, although, at 296 tonnes, demand is up on the previous quarter and notably above the five-year average. Gold ETFs saw continued outflows in Q3, primarily driven by investor sentiment that interest rates will remain high. However, continued strength in OTC investment resulted in 120 tonnes in the third quarter, driven in part by High Net Worth demand in Turkey and some stock building in other markets. 

India gold demand figures for the period July–September 2023 vs. last year: 

Jewellery demand remained resilient in the face of elevated gold prices. Still, there was a slight softening of jewellery consumption, down 2% year-on-year (YoY) to 516 tonnes, due to cost-of-living pressures on consumers in many markets worldwide. 

Total gold supply rose 6% YoY in Q3, with mine production reaching a year-to-date record of 2,744 tonnes. A consistently high gold price helped prop up recycling to 289 tonnes, 8% higher YoY. 

Louise Street, Senior Markets Analyst at the World Gold Council, commented, “Gold demand has been resilient throughout this year, performing well against the headwinds of high interest rates and a strong US dollar. Our report shows that gold demand is healthy this quarter compared with its five-year average. With geopolitical tensions on the rise and an expectation for continued robust central bank buying, gold demand may surprise to the upside.” 

Somasundaram PR, Regional CEO, India, World Gold Council said, “India’s gold demand of 210t in Q3 2023 was higher by 10% over Q3 2022 of 191.7 tonnes. The purchase of gold jewellery in India was up 7% YoY, aided by softer gold prices and festive demand, more pronounced in South India.” 

Investment gold demand, that is, bars and coins, jumped 20% to 54.5 tonnes from 45.4 tonnes in Q3 of the previous year. Price correction was a major factor that triggered the latent demand, which we believe continues to be strongly underpinned by strong positive economic sentiment mixed with uncertainties arising from various factors such as fear of inflation, below-normal monsoon and global developments. 

Gold recycling in India recorded 19.3 tonnes, a 20% growth over last year, which is more due to last year’s low base and perhaps some profit-taking. We believe recycling will continue to grow as initiatives of organised players to increase recycling of jewellery start gathering steam. With HUID in place, policy and tax incentives for recycling HUID-marked pieces can be enabled to grow recycling. 

Q4 will get the usual seasonal boost due to festivals and wedding purchases. However, any sharp price rise could delay the release of pent-up demand following a relatively weak H1. Trade feedback is that consumers have accepted the Rs 60,000 per 10g price point so a downward correction could trigger a significant jump, too. 

With first nine months demand at 481.2 tonnes, our estimate for full-year gold demand is in the range of 700-750 tonnes, marginally lower than last year's demand of 774 tonnes.”