Lower prices propel global gold demand

Driven by surging consumer and investment demand worldwide on the back of lower prices, total off take of gold hit its highest in more than two years, rising by eight per cent to 1,121 tonnes in third quarter compared to the same 2014 period, the World Gold Council's Gold Demand Trends report said on Thursday.
Spot gold prices fell in London to the lowest in five years on July 24 as investors exited exchange-traded products backed by the metal. Cheap prices helped drive buying, with investment demand surging to 230 tonnes in the period, the council said.
The price rebounded 3.5 per cent from the low by the quarter's end to $1,115.09 an ounce. On Wednesday gold price was $1,088.
Alistair Hewitt, head of Market Intelligence at the World Gold Council, said China and India remain the dominant figures in the global gold market, accounting for close to 45 per cent of total demand. 
"But what was particularly noticeable this quarter is that the consumer response to the price dip was a truly global occurrence. There were significant gains in bar and coin demand in China and across Europe, but it was in the US where we saw the most dramatic growth, with US Mint Eagle sales reaching their highest level since second quarter 2010. Global jewellery demand also picked up, in what is traditionally a quiet time of the year for jewellery demand," Hewitt said.
Demand in India, normally concentrated in the peak Diwali holiday buying season, rose 15 per cent to 211 tonnes as "festival purchases were brought forward."
Total consumer demand - made up of jewellery demand and coin and bar demand - totalled 928 tonnes, up 14 per cent while global investment demand saw a significant rise of 27 per cent to 230 tonnes, up from 181 tonnes in the same 2014 quarter. This was led by the US which saw a surge in bar and coin demand, up 207 per cent to 33 tonnes from 11 tonnes on the same period last year, with support from China, up 70 per cent to 52 tonnes and Europe up 35 per cent to 61 tonnes.
Global jewellery demand rose six per cent year-on-year to 632 tonnes compared to 594 tonnes in third quarter 2014. In India, demand was up 15 per cent to 211 tonnes and China was up four per cent to 188 tonnes. The US and the Middle East also saw gains, up two per cent to 26 tonnes and eight per cent to 56 tonnes respectively. 
Global central bank demand reached 175 tonnes, the 19th consecutive quarter of net purchases, demand in the technology sector declined four per cent to 84 tonnes as the sector continued to endure pressure, with the industry choosing to shift towards alternative, cheaper materials in technological applications. 
The WGC forecast demand for the year at 4,200 to 4,300 tonnes, after raising the estimate for central bank buying to a range of 500 to 600 tonnes, from between 400 and 500 tonnes, Hewitt said. Last year, overall demand totaled 4,217 tonnes. While Indian consumer demand, including purchases of bars, coins and jewelry, rose 13 per cent to 268 tonnes, the council warned the outlook for the fourth quarter was "muted." Total consumer buying in China rose 13 per cent to 240 tonnes.
 Total global supply was 1,100 tonnes in third quarter, up one per cent year-on-year. Total mine supply (mine production + net producer hedging) remained relatively flat up three per cent year-on-year to 848 tonnes compared to 814t tonnes in the same period last year. Year-on-year quarterly mine production shrank by one per cent to 828 tonnes in   against 836 tonnes in second quarter 2014. Recycling levels were down six per cent year-on-year to 252 tonnes compared to 268 tonnes in the same 2014 period.
- issacjohn@khaleejtimes.com

• Gold and Forex