Investment Demand for Gold Off in Q3, World Gold Council Posted by James Randolph on November 23, 2012
Despite the recent pickup in market activity as highlighted by a story from
Bloomberg today that notes the advance of gold and silver, the report released by the
World Gold Council, with is always retrospective, details the drop off in demand for gold
bullion and gold coin that occurred in the third quarter of this year.
In early trading on Friday, with many traders extending their Thanksgiving
holidays, the spot price of gold gained 0.3 percent to $1,733.34 per troy ounce as U.S.
gold futures for December delivery gained $5.60 per troy ounce to $1,733.80.
In its third quarter report on the world gold market, the council noted demand for
gold gained 10 percent overall from Q2 to $57.6 billion, but remained 11 percent lower
than the record levels recorded in 2011, mainly accounted for by a drop in bar and coin
The report notes that demand for gold bars and coins dropped 30 percent between
Q3 2011 and Q3 2012.
The report states investors continued to buy gold at historically high levels, but
investment demand was down from particularly high levels seen during the same period
in 2011. The most significant contribution to the fall in gold demand came from the drop
in bar and coin investment. This was largely reflective of a lack of strong inflows to
certain (notably Western) markets, rather than the emergence of any strong profit-taking.
In other words, a wait-and-see sentiment predominated in the markets as investors
did not pull positions for profit-taking but did not increase positions, either.
The report also observes that investors reacted to the conditions of the time—
a worsening of the European debt crisis, a weaker U.S. dollar, a U.S. debt downgrade,
poorly performing equity and credit markets, and rising inflationary pressures—all strong
drivers for demand in gold.
The report concludes the most recent quarter was characterized by subdued
activity across the asset spectrum for much of the period—a combination of summer
doldrums and uncertainty among investors.
Interestingly, the report also notes that investors in Europe accounted for more
than half of the 128.1 tonne decline in demand for bars and coins and central banks
continued as net buyers of gold during the period, but to a lesser extent than in the third
quarter of 2011.