Demand for gold fell seven per cent year-on-year and 13 per cent quarter-on-quarter to 831 tonnes in the third quarter of 2021, due to outflows from gold-backed exchange-traded funds (gold ETFs), according to the World Gold Council’s latest Gold Demand Trends report.
Net gold ETF sales were relatively small at 27 tonnes, but when compared to the pandemic-induced buying surge of a year earlier, this was enough to place overall gold demand into a year-on-year decline, despite demand increasing in all other sectors.
Consumer purchases of gold jewellery increased 33 per cent year-on-year to 443 tonnes.
Bars and coins – a class of physical gold products bought overwhelmingly by retail investors – saw a fifth consecutive quarter of year-on-year gains, with 262 tonnes purchased in the third quarter.
Gold used in technology grew nine per cent year-on-year and central banks added 69 tonnes to their reserves.
The gold price averaged US$1,790 an ounce throughout the quarter – down from the all-time US Dollar high in the third quarter of 2020, but above its three-year, five-year, and ten-year averages.
Total supply is three per cent lower year-on-year at 1,239 tonnes, despite mine production rising to the highest quarter on record.
The year-on-year drop was due to a sharp fall in recycling in response to lower gold prices.
World Gold Council senior markets analyst Louise Street said the relatively modest outflows from gold ETFs have had a disproportionate effect on this year’s figures, outweighing positivity almost everywhere else across the board.
She said: “The outflows themselves are part of a bigger picture – a year ago, investors were flocking to gold, seeking a hedge against the pandemic.
“And gold ETFs were particular beneficiaries of these flows, adding more than 1,000 tonnes over the first three quarters of 2020.
“So, while there has been selling by gold ETF investors this year, the outflows have been modest in comparison.
“The rest of the gold market is seeing positive news – not least the strong growth in jewellery and technology demand, especially pleasing because they are at least partially consequences of an overall global economic recovery.
“Likewise, central banks remain net buyers, and bar and coin investment is growing.
“Looking forward, we expect the full-year picture for gold demand to look very similar: strong consumer and central bank [demand] will mitigate losses from ETFs.
“Jewellery demand will continue to exceed last year’s levels, but investment demand in total will be weaker in 2021, despite healthy bar and coin demand.”