Gold investment demand persists amid shrinking production

Global gold demand grew modestly by 3 per cent to 1107.9 tonnes in the third quarter of 2019 on the same period last year, according to the World Gold Council.

Its latest Gold Demand Trends report shows exchange-traded fund (ETF) volumes hit an all-time high in September as investors increased their exposure to gold in response to low interest rates, negative yields and geopolitical and economic uncertainty.

The surge in ETF inflows outweighed softer demand elsewhere in the market.

Though central bank demand remained healthy, it was 38 per cent lower (156.2 tonnes) than the record levels of purchases (253.1 tonnes) during the third quarter of 2018.

The continued strength in the gold price, which hit a multi-year high, combined with consumers’ concern over the global economy’s health has caused jewellery demand to slide.

“An economic slowdown in India and China, coupled with the sharp increase in the gold price, mean many consumers have held off buying gold jewellery,” World Gold Council head of market intelligence Alistair Hewitt said.

“Looking forward, we expect to see many of these trends continue into the end of the year as monetary policy is likely to become even more accommodative in the United States and global political issues continue to weigh on sentiment.”

Persisting economic challenges have also contributed to the fall in technology demand for gold by 4 per cent, which the emerging 5G infrastructure helped to slow down.

Total consumer demand was 611.2 tonnes in the September quarter compared with 844.4 tonnes in the same period last year.

Total investment demand, however, rose by 110 per cent to 408.6 tonnes from 194.4 tonnes in the third quarter of 2018.

From the production side, Australia went contrary to the global lower trend, producing 7 per cent more gold year-on-year due to incremental increases at several mines.

Global mine production slid by 1 per cent at 877.8 tonnes in the third quarter, but still sits comfortably above the five-year quarterly average of 851.9 tonnes.

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