High gold price slows worldwide demand for gold, but …!

Gold market in the 3rd quarter

The World Gold Council (WGC) has published its new gold market report “Gold Demand Trends Q3 2019”. The report contains figures on global gold demand and gold supply for the period from July to September 2019.

 

Gold price damps demand

Accordingly, 1,107.9 tonnes of gold were in demand in the third quarter. Based on the WGC figures, this corresponds to an increase of 2.67 percent year-on-year and a decline of 3 percent compared with the previous quarter. According to the report, the first three quarters of 2019 saw the weakest demand for gold since 2009, with 3,317.5 tonnes for this period. This was mainly due to the sharp rise in the price of gold. But what the WGC report discreetly conceals: significantly more money was invested in gold! More about this at the end of this article.

 

Gold supply increased

According to the WGC, gold supply in the third quarter of 2019 rose by 3.6 percent year-on-year to 1,222.3 tonnes. Compared to the previous quarter, there was a minus of 0.38 percent. In terms of figures, this results in an “oversupply” of 114.4 tonnes of gold.

 

Strong inflows in ETF gold

Gold demand was driven by ETF inflows. This sector accounted for 258 tonnes in the third quarter. According to the World Gold Council, the ten largest gold ETFs held 2,855.3 tonnes of gold at the end of September, 1 per cent more than a year earlier. The largest representative, the SPDR Gold Trust, accounted for 920.5 tonnes, or 32 per cent.

 

Weak consumer demand

Consumer demand was weak. Demand for gold jewellery was 16 percent lower than in the previous year. According to the WGC, demand for gold coins and gold bars even shrank by 50 percent. Central banks again accumulated large quantities of gold with 156.2 tonnes. Compared to Q3 2018 and also compared to the previous quarter with more than 230 tons each, however, this demand also declined by more than 30 percent.

 

Strong rise in gold price

In the third quarter, the gold price rose by 12.4 percent to 1,472 US dollars per ounce (quarterly average price). Compared to the previous year, the gold price even rose by 21 percent (1,212 US dollars average price in Q3-2018). Last September alone there was a price premium of 7 percent. The previous high for the year was reached at 1,546 US dollars on 4 September (London P.M.). On a euro basis, the all-time high of 1,403 euros was reached on the same day.

 

24 percent more money in gold

Seen in this light, the development in demand calculated in tonnes alone also puts itself into perspective. If the average price of 1,472 US dollars per ounce is taken as a basis, demand in the third quarter of 2019 will amount to 52.45 billion US dollars. And this is at least 24 percent above the demand of the third quarter of 2018, for which monetary gold demand of 42.09 billion US dollars is calculated on the basis of the WGC figures. According to our calculations, monetary gold demand rose by 9 percent compared to the previous quarter.