Global gold demand fell by 7% during the July-September quarter to 831 tonnes compared to the same period of 2020, primarily due to outflows from gold-backed exchange-traded funds (gold ETFs), according to a World Gold Council (WGC) report.
The total demand stood at 894.4 tonnes during the third quarter of 2020, WGC's Q3 Gold Demand Trends 2021 report said on October 28.
Net gold ETF sales were relatively small (27 tonnes), but when compared to 274 tonnes during the pandemic-induced buying surge of a year earlier, this was enough to place overall gold demand into a year-on-year decline, despite demand increasing in all other sectors, the report observed.
"The ETF outflows were negative mainly localised to the U.S., while it did well in Europe and Asia. This decline was mainly due to 'risk on attitude among U.S. investors, gold price drop, stronger U.S. dollar among others," WGC Regional CEO, India, Somasundaram P.R. told PTI.
Gold price averaged $1,790 an ounce throughout the third quarter this year compared to $1,900, a 6% drop year-on-year.
“The relatively modest outflows from gold ETFs have had a disproportionate effect on this year's figures, outweighing positivity almost everywhere else across the board. The outflows themselves are part of a bigger picture.
“A year ago, investors were flocking to gold, seeking a hedge against the pandemic. And gold ETFs were particular beneficiaries of these flows, adding more than 1,000 tonnes over the first three quarters of the 2020." WGC Senior Markets Analyst Louise Street said.
So, while there has been selling by gold ETF investors this year, the outflows have been modest in comparison, she added.
Meanwhile, bars and coins (physical gold products bought by retail investors) saw 18% growth for the fifth consecutive quarter of year-on-year gains, with 262 tonnes purchased in July-September 2021 compared to the corresponding period of 2020 at 221 tonnes, it said.
The report further revealed that there was healthy growth in consumer demand across all markers during the July-September quarter.
Gold jewellery demand increased by 33% year-on-year during the third quarter at 443 tonnes compared to 333 tonnes in the same period of 2020.
Gold used in technology grew 9% YoY at 83.8 tonnes compared to 77.2 tonnes during the third quarter of 2020, the report stated.
The central banks added 69 tonnes to their reserves against selling off 10 tonnes in the same period last year, according to the report.
Further, the WGC report said the total supply was 3% lower YoY at 1,239 tonne compared to 1,279.4 tonnes last year despite mine production rising to the highest quarter on record.
The YoY drop was due to a sharp fall in recycling in response to lower gold prices, the report noted.
“The rest of the gold market is seeing positive news – not least the strong growth in jewellery and technology demand, especially pleasing because they are at least partially consequences of an overall global economic recovery,'' Ms. Street said, noting that the central banks remain net buyers and bar and coin investment is growing.
“Looking forward, we expect the full-year picture for gold demand to look very similar, strong consumers and the central bank will mitigate losses from ETFs. Jewellery demand will continue to exceed last year's levels, but investment demand in total will be weaker in 2021, despite healthy bar and coin demand,” she added.
