Gold demand slides to lowest in eight years

Q3 sees fall in bullion-backed ETF inflows and jewelry buying: WGC

Gold demand slid to its lowest in eight years in the last quarter as jewelry buying fell and inflows into bullion-backed exchange traded funds (ETFs) dried up, data from the World Gold Council (WGC) showed on Thursday.

Overall, demand fell 9 percent to 915 tons, its weakest since the third quarter of 2009, the WGC said.

That pattern is likely to feed through to year-end, with the WGC forecasting annual demand of just 3,900-4,000 tons, compared to 4,347 tons in 2016. Gold demand has not been below 4,000 tons on an annual basis since 2009.

“ETF inflows year to date are a fraction of the stellar inflows we saw last year,” the WGC’s head of market intelligence Alistair Hewitt said.

India, which along with China leads the world in gold consumption, saw particularly soft gold demand due to the introduction of the new goods and services tax from the start of July, the WGC said. That brought forward many purchases.

By year-end, the WGC expects Indian demand to hold at around 650-750 tons, in line with a weak 2016. Chinese demand is forecast at 850-950 tons.

Elsewhere, soaring stock markets also detracted attention from gold, the WGC said, denting interest in bullion-backed ETFs. ETF inflows totaled less than 19 tons in the last quarter, down from 144 tons a year earlier, outweighing a 17 percent rise in bar and coin investment to 222 tons.

Turkish consumer demand jumped 73 percent to 25.4 tons, though that was down quarteron-quarter. It was also well short of accounting for a huge jump in Turkish gold imports in the period to 115 tons from 17 tons a year earlier.

“We’ve seen an increase in exports as well,” Hewitt said. “One of the factors we have seen is increased trade between Turkey and the United Arab Emirates.”

Gold demand from the technology sector also grew, the WGC said, due to demand for memory chips used in highend smartphones.

On the supply side, overall mine output was down 1 percent at 841 tons in the third quarter.