Q3 gold de­mand steady, up 6.2t on ro­bust cen­tral bank buy­ing

Business a.m. - - COMMODITIES & AGRICULTURE -

RO­BUST CEN TRAL BANK buy­ing re­mained a sta­bil­is­ing fac­tor for gold de­mand in the third quar­ter (Q3) which hit 964.3 troy ounce, rep­re­sent­ing 6.2 troy ounce higher year-on-year, ac­cord­ing to data from World Gold Coun­cil.

Re­flect­ing the high­est level of net pur­chases since 2015, cen­tral banks’ gold re­serves grew 148.4t in Q3, up 22 per­cent year-on-year.

Bar and coin de­mand jumped 28 per­cent to 298 as re­tail in­vestors took ad­van­tage of the lower gold price and sought pro­tec­tion against cur­rency weak­ness and tum­bling stock mar­kets. Stock mar­ket volatil­ity and cur­rency weak­ness also boosted de­mand in many emerg­ing mar­kets. China, the world’s largest bar and coin mar­ket, saw de­mand rise 25 per­cent year-on-year while Ira­nian de­mand hit a five-and-a-half year high.

In jewellery, de­mand rose six per­cent in Q3 as lower prices caught con­sumers’ at­ten­tion. A grow­ing num­ber of cen­tral bank buy­ers saw de­mand in this sec­tor rise 22 per­cent year-on-year to 148.4 troy ounce, the high­est level of quar­terly net pur­chases since 2015. Also the dip in gold prices dur­ing July and Au­gust en­cour­aged bar­gain hunt­ing amongst price­sen­si­tive con­sumers with growth in In­dia and China out­weigh­ing weak­ness in the Mid­dle East.

De­mand for gold in tech­no­log­i­cal ap­pli­ca­tions rose in Q3 by one per­cent yearon-year, to 85.3t, in­di­cat­ing the eighth con­sec­u­tive quar­ter of growth, pri­mar­ily driven by gold’s use in elec­tron­ics such as smart­phones, servers and au­to­mo­tive ve­hi­cles.

Ex­change-traded funds, (ETFs), a mar­ketable se­cu­rity that tracks a stock in­dex, a com­mod­ity, bonds, or a bas­ket of as­sets shed 103.2t in the quar­ter un­der re­view and wit­nessed 116t de­cline when com­pared with in­flows of 13.2t in Q3 ’17.

The de­cline marked the first quar­ter of out­flows since Q4 2016.

Speak­ing on the aggressive buy­ing trend of cen­tral banks, Aasif Hi­rani, di­rec­tor of Trade­bulls Group in an anal­y­sis at­trib­uted the idea to pro­tect­ing the coun­tries’ re­serve and min­imis­ing cur­rency risks.

“Hun­gary, for in­stance, has an­nounced in­crease in its gold hold­ings from 3.1 met­ric tonnes to 31.5 tonnes, mean­ing a mas­sive ten-fold. But Hun­gary’s is not alone in gold hold­ings in­crease. In­dia also had in­creased gold hold­ings in June-July.

Rus­sia is lead­ing the way when it comes to buy­ing gold by cen­tral banks. This year, to­tal of 264 tonnes of gold have been bought by cen­tral banks. Rus­sian Cen­tral Bank added 26.1 tonnes in July alone. In 2017, Rus­sia added more than 223 tonnes. It was the third con­sec­u­tive year where Rus­sia has in­creased its gold by more than 200 tonnes in a year,” Hi­rani ex­plained.

“With that, Rus­sia has taken over China to be­come the fifth largest gold hold­ing coun­try. China had sur­passed Rus­sia in this race way back in 2001.

To be fair, China has not of­fi­cially an­nounced its in­creases in gold hold­ing since 2016. So, Rus­sia on paper would be the fifth largest al­though we think China still has more gold hold­ings than Rus­sia,” he added.

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