FOCUS – Q3 gold demand at 4-yr low; ETFs outflows, India to blame – WGC

London 14/11/2013 – Third-quarter gold demand fell to a four-year low while investors fled exchange-traded funds, figures released by the World Gold Council (WGC) showed.

In the July-September period, global gold demand was just 868.5 tonnes, the figures showed, a drop of 232.9 tonnes or 21 percent from the same quarter of last year and below the second-quarter total, making it the first quarter-on-quarter decline since the third quarter of 2007.

“The demand response to the sharp move lower in the gold price during the second quarter was so strong that it resulted in a degree of ‘cannibalisation’ of third quarter demand as gold purchases were brought forward to the second quarter,” the WGC said.

The Indian government’s moves to curb local demand in a bid to lower its current account deficit hurt purchases, it also said.

“Outflows from ETF positions, although much slower in pace than the previous quarter, were the main reason for the weaker quarterly total,” the WGC added.

But consumer level demand remains resilient, with eastern markets the driving force of growth in demand for gold jewellery, bars and coins.

“Two key themes have emerged in 2013: the rising level of consumer demand off-setting outflows from ETFs and the geographical flow of gold from western to eastern markets,” the WGC said.

This reflects the cyclical nature of the ETF market, with strong inflows while prices rise followed by outflows in periods of price weakness.

Despite slowing somewhat, central bank purchases “were again a solid pillar of demand”, the council said.

Supply, meanwhile, was down just three percent at 1,145 tonnes, with a reduction in recycling offsetting a “modest” increase in mine production.

(Editing by Mark Shaw)

Eddie van der Walt

About Eddie van der Walt

London-based, South African-born metals markets reporter, currently focusing on precious metals and the London Metal Exchange. All that glitters must be sold. Twitter: @EvdW