Global demand for gold rose slightly in the third quarter compared to the same period a year ago as resurgent buying from central banks and retail consumers balanced huge outflows from exchange traded funds, the World Gold Council said on Thursday.
Demand totaled 964.3 tonnes, up from 958.1 tonnes in July-September 2017, the WGC said in its latest quarterly demand trends report.
Central banks bought 148.4 tonnes of gold in the third quarter, the most for any quarter since 2015, according to the WGC. Russia, Kazakhstan and Turkey continued to build their reserves, while India stepped up purchases and Poland and Hungary began buying.
The WGC expects central banks to purchase 400-500 tonnes this year, Hewitt said. On the supply side, mined output hit a record high of 875.3 tonnes but less recycling and reduced hedging by miners meant overall supply fell 2 percent year-on-year to 1,161.5 tonnes in the third quarter.
Despite the uptick, it was the third consecutive quarter of demand below 1,000 tonnes. Gold consumption in the first nine months of the year has been the lowest since 2009, according to the WGC. Exchange traded funds saw outflows of 103.2 tonnes over July-September after inflows of 13.2 tonnes in Q3 last year.
Almost three quarters of the outflow was from funds in the United States, where a strengthening dollar, rising interest rates and soaring stock markets prompted investors to ditch gold, pushing prices in mid-August to their lowest in 19 months.
But low prices, along with weakening currencies and unstable stock markets in countries including top consumer China, helped spur retail buyers, said Alistair Hewitt, the WGC's head of market intelligence. Gold is traditionally seen as a safe place to store assets in uncertain times.
"The rupee gold price in August fell to its lowest level this year, the renminbi gold price to its lowest in two years, the euro area gold price fell to its lowest in 2-1/2 years," Hewitt said. "That just proved to be a great buying opportunity for bar and coin investors."
Bar and coin demand surged by 28 percent year-on-year to 298.1 tonnes in the third quarter, according to the WGC. Consumption of gold for jewelry rose 6 percent from a year ago to 535.7 tonnes, the highest since the fourth quarter of 2017.
In India and China, the biggest buyers, demand rose 10 percent, to 148.8 tonnes in India and 174.2 tonnes in China. Hewitt said the WGC expected overall demand this year around 700-800 tonnes in India and 900-1,000 tonnes in China.
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