Global Gold Demand Slips in Q3, World Gold Council Says

on Nov 15, 2012
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On 15 November 2012, the World Gold Council (WGC) reported that global gold demand had dropped by as much as 11 percent in the third quarter of 2012. The decline in demand, relative to the exceptional demand observed in the same quarter of 2011, is “blamed” on Chinese consumers whose appetite for gold fell at the fastest rate in nearly a decade, presumably on account of slowing economic growth. Gold, however, has not lost its lustre for Indian investors, with growing demand from India saving the precious metal from a bigger demand fall than what was the case.

**Global Gold Demand Drops 11 Percent in Q3**
The WGC reports that in the quarter ended September 30, gold demand was 1,084.6 tonnes, or 11 percent down, relative to the record Q3 2011 figure of 1,223.5 tonnes. Yet, the industry lobby group notes that global demand remained resilient and was still above the five year quarterly average of 984.7 tonnes.

The WGC’s gold demand and supply quarterly data also indicate that demand in the jewellery sector was down 2 percent to 448.8 tonnes, whereas demand for gold in the technology sector declined by 6 percent. Demand for exchange-traded funds (ETFs) and other similar products, however, was up by as much as 56 percent on the previous year.
“Gold is beginning to re-establish itself as part of the fabric of the financial system,” noted Marcus Grubb, the WGC’s managing director of investment research in the WGC’s press release. “It is clear from five year rising demand trends that gold’s fundamental property as a vehicle for capital preservation continues to endure, as evidenced by this quarter’s increase in global ETF investment, up 56 percent and continued purchasing by central banks, the ultimate long term investors.” Central banks purchased 97.6 tonnes, down from 140.8 tonnes the previous year.

**Chinese Gold Consumption Falls**
The main reason for the decline in global gold demand is the 8 percent drop in demand from China, which fell to 176.8 tonnes in the third quarter of 2012, relative to 191.2 tonnes of gold purchased by Chinese consumers in the third quarter of 2011. As noted by the FT, the surge in China’s gold demand helped the precious metal reach a record high of $1.920 an ounce in September 2011.

“The fall in Chinese demand coincides with weaker economic numbers in China in Q3,” notes Mr Grubb, as quoted by Reuters, adding that there was some evidence that the economic situation in China was improving. “If that’s true, we won’t see a repeat of this Chinese weakness in the fourth quarter.”
**Demand from India on the Rise**
China is second only to India as the world’s largest gold consumer, with Indian demand softening the global decline in gold demand. The WCG reports that the Indian market showed signs of recovery in the third quarter and demand was up 9 percent to 223.1 tonnes on account of an increase in both investment and jewellery demand. “Finally we’re starting to see the Indian market come back,” commented Mr Grubb, as quoted by Reuters. “And the anecdotal evidence is good looking forward to fourth quarter demand – premiums are high again in the Mumbai market, and the strength of the rupee has meant you have seen rupee prices moderate somewhat.”

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