In the third quarter, global gold demand experienced a 3% annual increase, amounting to 1,313 metric tons. This marked the highest level of demand ever recorded, primarily driven by a surge in investment demand, reported the World Gold Council.
Spot gold prices have seen a remarkable increase of 50% in the year to date, culminating in a record high of $4,381 per troy ounce on October 20th. This surge can be attributed to safe-haven demand triggered by geopolitical instability, uncertainty surrounding U.S. tariffs, and a recent wave of ‘fear-of-missing-out’ or ‘FOMO’ buying.
Senior markets analyst at the World Gold Council, Louise Street, expressed optimism regarding the future of gold. She pointed to factors such as ongoing weakness in the U.S. dollar, predictions of lower interest rates, and the potential threat of stagflation, that could further stimulate investment demand. Street also noted that their research suggests the market is not yet saturated.
The demand for gold bars and coins witnessed a rise of 17% in the third quarter, with India and China leading the way. Inflows into physically backed gold exchange-traded funds soared by 134%, according to the industry body whose members comprise global gold miners.
These categories combined managed to counterbalance the continuing steep decline in gold jewellery fabrication, which is the largest category of physical demand. The latter saw a 23% drop to 419.2 tons as high prices deterred buyers worldwide.
Central banks, another significant source of gold demand, ramped up their purchases by 10% to 219.9 tons in the third quarter. This estimate was based on reported purchases and the World Gold Council’s assessment of unreported buying.
From January to September, central banks have acquired 634 tons, which although lesser than the unusually high amounts of the last three years, is still significantly higher than the levels recorded before 2022.
On the supply side, a 6% contribution from recycling and a 2% increase in mine production in the third quarter led to the gold supply reaching an all-time high.
What factors are contributing to the increased demand for gold?
Economic factors such as continued U.S. dollar weakness, lower interest rates, and the threat of stagflation are driving increased investment demand for gold.
Which countries are leading in the demand for gold bars and coins?
India and China are currently leading in the demand for gold bars and coins.
How have central banks influenced gold demand?
Central banks have increased their purchases by 10% to 219.9 tons in the third quarter, thereby significantly influencing gold demand.
