Lower ETF inflows hit global gold demand

A combination of factors such as lower inflows into exchange-traded funds (ETFs) and introduction of the Goods and Services Tax (GST) in India led to a fall in the global demand for gold in the third quarter of the current calendar year.

According to the latest Gold Demand Trends report by the World Gold Council (WGC), global jewellery demand was down 3% year-on-year in Q3, “as the newly introduced Goods & Services Tax and tighter anti-money laundering regulations around transactions in India deterred buyers.”

Weak quarter

“A weak quarter in India was the main reason for the year-on-year decline in global demand (for gold jewellery), down from 495 tonnes in Q3 2016 to 479 tonnes in Q3 2017. Jewellery volumes continue to languish below longer-term average levels,” said the report. Further, global gold demand in Q3 2017, which was pegged at 915 tonnes, witnessed a drop of 9% compared with the same period in 2016. This decline was led by two key factors: a softer quarter in the jewellery sector and significantly lower inflows into ETFs, as per the report.

As per the findings, while investors continued to favour gold’s risk-hedging properties through ETFs, the greater focus was on buoyant stock markets that impacted the inflows into ETFs.

Meanwhile, the demand for gold bar and coin was driven in large part by China as the global investment demand rose by 17% from relatively weak year-earlier levels. Incidentally, mainland investors in China bought on price dips, clocking up a fourth consecutive quarter of growth, as per the report. The central bank demand of 111 tonnes in Q3 was 25% higher year-on-year as Russia and Turkey together added nearly 95 tonnes of gold to global official reserves. Interestingly, volume of gold used in technology increased for the fourth consecutive quarter. Strong demand for LEDs and continued growth in the use of 3D sensors in new smartphones boosted demand by 2%.

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Printable version | May 10, 2021 1:31:02 AM |

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