Gold prices are expected to receive a significant boost as central banks worldwide maintain their historic pace of purchasing the precious metal. According to the latest report from the World Gold Council’s Q3 Gold Demand Trends, the global demand for gold, excluding over-the-counter (OTC) transactions, reached 1,147 tonnes in the July-September quarter. This figure represents an 8% increase from the five-year average.
The report highlights that net central bank purchases in the third quarter totaled 337 tonnes, marking the third strongest quarter in the data series. However, this fell short of the record-breaking 459 tonnes recorded in Q3 2022. Year-to-date (YTD), central banks have purchased a net 800 tonnes of gold, the highest amount ever recorded for a nine-month period.
While the report indicated a 56% year-on-year (YoY) increase in Q3 investment demand, totaling 157 tonnes, it remained weak compared to the five-year average of 315 tonnes. Bar and coin investment witnessed a 14% YoY decline to 296 tonnes, primarily driven by sharp decreases in Europe.
Jewelry consumption softened slightly, experiencing a 2% YoY decline to 516 tonnes, owing to the continued strength of gold prices.
Despite the surge in bond yields and a strong US dollar, the World Gold Council emphasized the resurgence of central bank net buying in the quarter, alongside robust bar and coin demand, contributing to the resilience of gold prices. However, the Council noted that Gold Exchange-Traded Funds (ETF) and futures investors have shown limited interest in gold, while bar and coin demand has remained unexpectedly robust.
The report underlined the potential for a rebound in ETF inflows in the fourth quarter, given the underlying support for gold, geopolitical tensions, and a shift in sentiment reflected in COMEX futures.
While bar and coin demand in China and India are expected to remain strong, driven by different factors such as economic and geopolitical uncertainty and wealth-driven buying, European demand is yet to show signs of recovery. The report remains cautious about the outlook but holds onto the potential for an upside.
Investors are advised to seek guidance from certified experts before making any investment decisions, as the views and recommendations mentioned in the report are those of individual analysts or broking companies.