Global demand for gold has reached a historic high, both in terms of value and weight. The World Gold Council (WGC) reported that in the third quarter of this year, 1,313 tons of gold were demanded worldwide, reflecting a 5% increase compared to the same period last year. Due to high gold prices, the total value of this demand surpassed $100 billion for the first time in history.
Louise Street, an analyst at the WGC, explained that the primary driver of this surge is investment demand. Central banks around the world are also significant buyers of gold as they seek to diversify their currency reserves and reduce reliance on the US dollar. Although central banks are taking their time, they tend to buy strategically when prices are favorable.
Central Bank Demand and Price Trends
In the third quarter, central bank demand was 186.2 tons, about half of what it was in the same quarter last year and lower than the previous quarter. Street noted that Poland has recently made substantial gold purchases, along with central banks in Hungary and India. There is a broad group of central banks that generally buy gold, and their purchases could increase if prices become more attractive.
The gold price has been consistently setting new records. Recently, it reached $2,758.49 per ounce, marking a historical peak. Bullion Vault, a gold trading firm, has compared this surge in gold prices to previous periods and noted that it is relatively unusual. The only year since the euro’s introduction with more gold price records was 2010.
Jewelry Demand Declines
Demand for gold in jewelry manufacturing has decreased, with third-quarter purchases totaling 543.3 tons—a 7% decline from the previous year. High prices likely contributed to this downturn. For example, gold jewelry purchases in China fell significantly, resulting in the weakest third quarter since 2010. The WGC attributed this weakness to ongoing high local gold prices, low consumer confidence, and slower economic growth.
In contrast, India has seen increased consumer demand for gold jewelry after lowering import duties in July.
Investment Demand Rises Sharply
Investment demand for gold surged dramatically, reaching 364.1 tons in the third quarter, a 132% increase year-on-year. This rise was largely driven by “paper gold” investments, including exchange-traded funds (ETFs) and similar products. Last year, there was a net outflow of 139.1 tons of gold from these investments, but this year, there was a net inflow of 94.6 tons.
However, the demand for physical gold, such as bars and coins, declined globally from 295.9 tons to 269.4 tons, a drop of 9%. Over-the-counter (OTC) transactions increased, rising from 69.4 tons in the previous year to 136.5 tons in the third quarter of this year.
Trends in Germany and Turkey
In Germany, the trend of individuals selling physical gold due to high prices has slowed down. The net demand for bars and coins was 3.5 tons in the third quarter, down from 11.5 tons a year earlier. Earlier this year, demand had been negative, meaning more people sold gold bars and coins than bought them. Street noted that some investors in Germany may be waiting to see if prices will rise further before selling.
In Turkey, high-interest rates have reportedly dampened the demand for gold bars and coins.
Industrial and Dental Demand
A portion of global gold demand also comes from industrial and dental applications. The demand for dental gold remains slightly above two tons, with a recent decrease to 2.2 tons. However, demand from the electronics sector has risen significantly, climbing from 77.3 tons to 83 tons, a 7% increase year-on-year. The electronics industry, particularly in smartphone manufacturing, has seen a notable rise in gold usage. Additionally, gold used in computer chip manufacturing for artificial intelligence has become a critical component of gold demand, according to analyst Street. The WGC reported that gold used in printed circuit boards had a strong quarter.
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