Fri. Mar 29th, 2024
GoldGold

Demand for gold reaches a new low. Global demand for gold plunges to 829.3 tonnes in the third quarter of the year as the COVID-19 pandemic rages on. This is the lowest the gold demand has dropped since Q3 2009. According to the World Gold Council’s (WGC), the latest Gold Demand Trends report, year-to-date demand for 2,972.1 tonnes was 10 percent lower than the demand in the same period of 2019.

Although there the Q3 saw a drop in demand, significant growth in investment demand was seen during this time. Investment demand rose by 21 percent year on year. Globally, investors bought 222.1 tonnes of gold bars and coins and an additional 272.5 tonnes through gold-backed Exchange Traded Funds, ETFs. Year-to-date, gold ETFs have increased their holdings by a record of 1,003.3 tonnes.

Quarterly inflows of 272.5 tonnes took global holdings of gold-backed ETFs to a new record of 3,880 tonnes. As the pace slowed down from H1, sustained inflows throughout Q3 demonstrate the continued motivation of ETF investors to add to their holdings.

Early in the month of August, the US dollar gold price rose to a record high of $ 2,067.15/oz. This followed by a pullback of price and ended the quarter at $ 1900/oz. Record high price was also seen in various other currencies such as rupee, the yuan, the euro, and sterling. In Q3, the bar and coin investment jumped to 222.1 tonnes, which is up by 49 percent year on year. Major retail investment markets also saw growth.

COViD-19 also affected the jewelry sector. Q3 demand fell 29 percent y-o-y to 333 tonnes. Countries like China and India accounted for the largest volume declines.

Louise Street, Market Intelligence at the World Gold Council, said, “The impact of COVID-19 is still being felt in the gold market across the world. The combination of continued social restrictions in many markets, the economic impact of lockdowns, and all-time high gold prices in many currencies proved too much for many jewelry buyers. We believe that this trend will likely continue for the foreseeable future.”

He also added, “However, looking to the investor landscape we saw further record inflows into gold-backed ETFs in Q3, taking the global total to a record high. It was equally encouraging to see gold’s role as a safe-haven for retail investors shine through this quarter, as people continue to seek stability in volatile markets.”

WGC also informed that the central banks of Turkey and Uzbekistan sold 22.3 tons and 34.9 tons of gold, respectively, in the third quarter.

In India, the gold price has gone down from over ₹  56,000 per 10 grams in August to around ₹ 51,000. The gold price was marked at ₹ 52, 430 today in Kolkata. The rise in COVID-19 pandemic along with continuing uncertainty has led to volatility and a fall in the stock markets.

Somasundaram PR, managing director for India at the World Gold Council said, “This has been partially due to easing of lockdown and some low prices in August that provided a small window of buying opportunities for the discerning. On the other hand, gold’s safe-haven attributes and anticipation of price rise paved the way for an increase in investment demand for gold bars and coins.”

He also added, “However as we are still reeling under the impact of the pandemic and fear of the second wave of infections without clear sight of many variables on consumer behavior, volatile prices or length of the disruptions, we will not be able to quantify the impact on the full-year gold demand in India other than to say that demand could be multi-year low.”

 

By Swastik Bhattacharjee

A student from Kolkata. Currently content creator at The Indian Wire.