According to the latest Gold Demand Trends report from the World Gold Council, covering the period July to September 2014, in India, jewellery demand saw a 60% year on year increase to 183t in Q3 2014, the second highest Q3 on record for the country. While the increase is partly reflective of the weakness in Q3 in India last year – when the government introduced import curbs and raised import duties – it also demonstrates the resilience of the country’s appetite for gold jewellery. Improved consumer confidence in both the domestic economy and the new government added to the positive sentiment, with strong levels of purchasing being seen in the build up to Diwali.
Overall jewellery demand softened slightly down 4% to 534t, when compared with an exceptional quarter in 2013. Taking a slightly longer term view, Q3 2014 jewellery demand was marginally stronger than the quarterly average of 527.6t. Year to date volumes continue to extend the broad uptrend from the low seen in 2009.
Looking behind this overall number, global demand for gold was down just 2% year on year to 929 tonnes (t). Investment demand, a combination of bars and coins and exchange-traded funds (ETF), was up 6% to 204t. However, investment in bars and coins was down 21% to 246t. This reflects an adjustment towards more normal levels of demand after a surge of unprecedented consumer demand took place last year. ETF outflows stood at 84t for the year to date compared to 699t in the same period last year. Third quarter demand for bars and coins was very close to the 10-year quarterly average of 240.6t. It’s worth noting that before the financial crisis of 2008, the European bar and coin market was virtually non-existent.
Marcus Grubb, Managing Director of Investment Strategy at the World Gold Council said: “This quarter the market continued to find its feet after an exceptional 2013, with China catching its breath and buying in the build up to Diwali driving Indian jewellery purchases. The figures for India and China this quarter reinforce the need to understand the factors which underpinned an exceptional Q3 last year. In 2013, India was impacted by import curbs and increased import duties imposed by the previous government, whereas exceptional buying in China during the same period shaped buying patterns in 2014.
The long-term sources of demand – jewellery, investment, central banks and technology remain robust and diverse. People around the world buy gold for different reasons at different times, reinforcing the unique self balancing nature of the gold market. With recycling at a seven year low and mine supply looking increasingly likely to be constrained in the future the outlook for physical gold demand remains strong.”
Central banks bought 93t of gold in Q3 2014, the 15(th) consecutive quarter that banks were net purchasers of gold. Year to date, central banks have bought 335t of gold compared to 324t in the same period last year. This was driven by a number of factors including a continued diversification away from the US dollar and the backdrop of ongoing geopolitical tensions.
Technology demand was 98t, 5% lower than a year ago as the industry continued its shift towards alternative materials in technological applications.
Total supply fell by 7% in Q3 2014, continuing the broad themes surrounding gold supply during the first half of the year. Mine production stabilised (up 1% to 812t) but recycling slowed considerably, reaching its lowest year to date levels since 2007 at 807t.
WGC report key findings
• Jewellery remains the biggest component of gold demand, representing more than half of all demand at 534t, which is 4% lower year on year. Jewellery demand was driven by India, which increased 60% to 183t. UK and US demand was also strong. Chinese jewellery demand fell 39% to 147 as the jewellery market caught its breath after an exceptional year for demand last year.
• Central banks bought 93t of gold in Q3 2014, 9% lower year on year, but the 15(th) consecutive quarter that banks were net purchasers of gold.
• Investment demand (bars and coins and ETFs) was up 6% to 204t. However, there was a 21% fall in bar and coin demand from 312t to 246t following unprecedented levels of demand last year. ETF outflows stood at 41t compared to 120t in the same period last year.
• Technology demand was 98t, 5% lower than a year ago as the industry continued its shift towards alternative materials in technological applications.
• Total supply fell by 7% year on year to 1,048t. Mine production was up slightly 1% to 812t, but recycling of gold continued to abate, declining 25% year on year to 250t, and on a year to date basis is the lowest level since 2007.