Global demand for gold rose to another record

In the third quarter, gold demand increased by 5 percent compared to the same time last year, to 1,313 tons. Quarterly demand exceeded $100 billion in dollar terms for the first time, helped by both strong investment demand and a very rapid rise in gold prices.

Investors’ money is flowing into gold

Investor money flowed massively into gold in the third quarter, with global investment demand more than doubling to 364 tons. 95 tonnes flowed into gold exchange-traded funds (ETFs) – the last positive inflow into ETFs was in the first quarter of 2022. This indicates that institutional money has started to flow into the market during a bullish period.

Demand for coins and bars decreased by 9 percent compared to a year ago. This year, the demand for coins and bars has been a total of 859 tons after nine months, which is slightly higher than the 10-year average (774 tons).

“In the third quarter, both investment demand and over-the-counter activity in the market increased, which helped the price of gold to rise. While high prices constrained retail demand, India’s decision to reduce gold import duties also helped keep retail demand exceptionally high,” said Louise Street, senior analyst at WGC.

He stated that investor demand was largely driven by the fear of missing out on price increases ( fear of missing outalso known as FOMO ). “Investors have shown that they start buying when the price moves. They are encouraged by the lowering of interest rates, the political situation in the USA and the escalating conflicts in the Middle East,” he added.

Central bank purchases remain high

Central banks’ gold purchases slowed somewhat, reaching 186 tons in the quarter. Since the beginning of the year, central banks have bought 694 tons of gold, which is about the same size as in 2022, when central banks bought 1,082 tons of gold, considering the first 9 months. In 2022, central bank purchases reached the highest level since the 1950s, when data on the market began to be collected.

The rapid increase in prices reduced the demand for jewellery

The price of gold was rapidly increasing in the third quarter, and the average price for the quarter was 2,474 dollars per ounce. This put demand from jewelery under pressure. Compared to a year ago, the demand related to jewelry decreased by 12 percent in quantity. However, in dollar terms, demand increased by 13 percent due to the rise in gold prices. To some extent, this indicates that they are willing to pay more for jewelry, but smaller quantities are bought due to the increased prices.

Demand in the technology sector increased by 7 percent year-on-year, helped by both the electronics sector and the boom in artificial intelligence. Although industrial demand is a small part of demand for gold, growth in the sector is still supportive.

The gold market supply increased by 5 percent compared to a year ago. Mine production increased by 6 percent, and 11 percent more gold went into processing.

Tavid analyst Mait Kraun’s comment:

“WGC’s third quarter report confirms the process that started at the beginning of the summer, that institutional money has begun to flow more and more into gold. In 2022, 2023, and also at the beginning of 2024, this factor was missing from the market – rather, institutional investors were selling their gold, and the price was driven higher by central banks and Chinese and Indian investors. That has now changed and it is highly likely that investor demand will remain strong.

The change in sentiment can be seen very clearly on the gold market – in 2020-2023, the price of gold traded in the range of 1800-2000 dollars most of the time and there were no special movements. Now that the price is up 50 percent from the 2022 lows, the yellow metal is also getting more and more attention. Investors have a legitimate question: what are the processes that cause gold to rise so quickly? It is increasingly recognized that the debt burdens of countries have become too large, budgets are in deep deficits and interest payments on debts are swelling. The monetary system is by no means in the best shape. If we add to this the high demand of central banks and China and India, we get a compote that leads to a very rapid price increase.