By Paul Ploumis
SEATTLE (Scrap Monster): The global demand for gold in Q3 this year, dropped sharply by 10% on high gold prices, says Gold Demand Trends Report for Q3 2016 released by the World Gold Council (WGC). The investment through Exchange Traded Products (ETPs) by consumers increased during the quarter, though at a slower pace than in initial two quarters. The gold prices climbed further higher during the quarter. The gold demand during the third quarter of the year stood at 992.8 tonnes.
The total gold supply in Q2 amounted to 1,172.7t, modestly higher by 4% when compared with the supply of 1,127.2t recorded during Q2 2015. Supply from recycling increased sharply by 30% over the previous year to 340.9t. Mine supply recorded decline of 4% during the quarter. The gold mine production totaled 831.8t, as compared with the mine output of 865.6t during Q3 ’15. The mine output from Canada and Indonesia increased during the quarter, whereas lower-grade mining at Oyu Tolgoi led to reduced gold mine production by Mongolia.
According to WGC, the inflows into Exchange-Traded Products (ETPs) continued to remain robust during Q3 2016. ETF inflows totaled 145.6t during the third quarter of the year. The value of gold-backed ETF AUM surged higher to 2,335.6t, hitting the highest level since April 2013. The year-to-date inflows into ETPs totaled 725t so far this year. European physically-backed gold ETPs accounted for 78% of the quarterly inflows.
Investment demand in Q3 this year totaled 335.7t, significantly higher by 44% when matched with the corresponding quarter last year. Also, year-to-date investment touched record of 1,389.2t. The demand for bars and coins dropped significantly during the quarter, falling by more than one-third to 190.1t. The cumulative demand for bars and coins during the initial three quarters of 2016 hit the lowest level since 2009.
The total demand for jewellery in Q3 stood at 493.1t. This was the lowest quarterly total since Q3 2011. Jewellery demand in H1 2016 fell by 185.5t from the previous year, on account of weakness in China and India- the key key jewellery markets of the world. The jewellery demand during Q3 2015 had totaled 621.6t. The Indian gold demand dropped by 28% from 214.1t in Q3 ’15 to 154.7t in Q3 this year. The year-to-date demand for gold jewellery has declined by 30% so far in 2016.
Gold jewellery demand in China slipped further during the quarter. The Q3 demand dropped 22% to 141.5t. The gold jewelry demand in the country during Q3 last year had totaled 180.6t. The year-to-date demand is down by 18%, WGC Demand Trends Report noted. The jewellery demand remained weak in South East Asian countries. The South Korean demand witnessed sharpest year-on-year decline of 24% during the quarter to 2.8t. Japanese demand slipped by 4% to 4.2t in Q3, whereas Indonesia’s gold jewellery demand dropped by 6%.
Demand across the Middle East remained weak. The demand in Egypt, Saudi Arabia and the UAE hit record lows during the quarter. The Egyptian demand halved to almost 6t. The other two countries reported 23% decline in demand during Q3. On the other hand, Iran managed to report 6% growth.
The US jewellery demand in Q3 was marginally lower by 1% over the previous year at 25.9t. The year-to-date demand totaled 74.6t, almost flat when compared with the nine-month period in 2015.
Official gold holdings
Central bank purchases on a net basis totaled 81.7t during the third quarter of 2016, down sharply by 56% over the year. The year-to-date net purchases totaled 271.1t. The official gold holdings by Russia have increased by 43.9t during the quarter. China (+15.2t) and Kazakhstan (+10t) too reported increase in gold reserves during the quarter. Belarus also added 3.1t to their gold reserves during Q3 ’16.