Central banks continue to stock gold but ETF investors dump bullion

A gold bar sits on a table in a vault in Germany. Photographer: Guenter Schiffmann

Amid a lackluster gold market, Central banks’ demand for gold remains robust, and overall consumer market demand is up 13%, a World Gold Council report on Q3 demand trends released today has revealed.

The World Gold Council found that gold demand reached 964.3 tonnes in Q3, which was 6.2 tonnes higher year-over-year. Central bank buying  reached a three year high in September, and  emerging market central banks played a key role, with Russia, Turkey and Kazakhstan accounting for 86% of central bank purchases in the first half of 2018.

Consumer demand rose 13%, which offset large ETF outflows

Central bank gold reserves have grown 148.4 tonnes, up 22 % – the highest level of net purchases since 2015.

The World Gold Council believes that many emerging market central banks are turning their attention to gold as after years of exposure to the US  dollar, and as a natural currency hedge against the reserve currency.

Consumer demand rose 13%, which offset in large ETF outflows. According to the report,  ETFs saw a 116 tonnes decline when compared with inflows of 13.2t in Q3 2017, experiencing the first quarter of outflows since Q4 2016. The World Gold Council also believes North America accounted for 73% of outflows, fuelled by risk-on sentiment, the strong dollar and price-driven momentum.

Globally, bar and coin demand jumped 28% to reach 298.1 tonnes as retail investors took advantage of the lower gold prices and sought protection against currency weakness and tumbling stock markets. Jewellery demand rose 6% in Q3, as lower prices caught consumers’ attention.

Read the full report here.

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