Global gold demand increased 28 per cent annually to 1,181 tonnes in the third quarter of 2022 as investors used the precious metal as a store of value amid rampant inflation and geopolitical uncertainty, the World Gold Council said.
Gold demand in the three months to the end of September was boosted by consumers and central banks, although there was a notable contraction in investment demand, the trade body said in its latest report.
Strong demand pushed gold's year-to-date total to pre-Covid levels and was up 18 per cent annually, the WGC said.
“Despite a shaky macroeconomic environment, demand this year has reflected gold’s status as a safe-haven asset, underscored by the fact that it has outperformed most asset classes in 2022,” Louise Street, senior markets analyst at World Gold Council, said.
“Looking ahead, we anticipate central bank buying and retail investment to remain strong and that could help offset potential declines in OTC [over-the-counter] and ETF [exchange-traded fund] investment that may prevail if the dollar strength persists.”
Geopolitical and economic uncertainty is mounting across the globe following Russia’s military offensive against Ukraine, with inflation also rising due to higher commodity prices and supply chain disruptions.
The International Monetary Fund cut its global growth forecast for 2023 and warned of a cost-of-living crisis as the world’s economy continues to be affected by the war in Ukraine, broadening inflation pressures and a slowdown in China.
The IMF maintained its global economic estimate for this year at 3.2 per cent but downgraded next year’s forecast to 2.7 per cent — 0.2 percentage points lower than the July forecast.
Gold investment was down 47 per cent year on year, as ETF investors responded to higher interest rates and a strong US dollar with outflows of 227 tonnes, the WGC said.
However, investors sought to hedge inflation with gold bar and coin investment, driving total retail demand up 36 per cent annually to 351 tonnes. This was supported by significant purchasing in Turkey and Germany.
Weakness in OTC demand and negative sentiment in futures markets hampered gold’s price performance, contributing to an 8 per cent quarter-on-quarter decline in price during the third quarter, according to the report.
Meanwhile, jewellery consumption is now back to pre-pandemic levels at 523 tonnes, growing 10 per cent annually, according to the WGC.
Much of this growth was led by India, where urban consumers drove up demand 17 per cent annually to 146 tonnes. Chinese jewellery demand also saw a 5 per cent annual increase.
Jewellery demand across the Middle East benefited from lower gold prices during the quarter, while higher oil revenues and increased tourism also boosted demand in some markets.
Jewellery consumption in Saudi Arabia was up 20 per cent compared with the same time last year, while the UAE recorded a 30 per cent increase.
Demand in Turkey was 19 per cent higher at 11 tonnes, the strongest quarterly total since the fourth quarter of 2017.
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“We also expect to see jewellery demand continue to perform strongly in some regions such as India and South-east Asia,” Ms Street said.
Central bank buying picked up significantly, with record purchases of about 400 tonnes in the third quarter. Turkey, Uzbekistan and Qatar were among the biggest reported buyers.
Meanwhile, demand for gold in industrial applications fell by 2 per cent annually to 77 tonnes on weakening consumer confidence, the report said. Gold used in the electronics sector declined 9 per cent to 63 tonnes on falling consumer demand.
High inventory levels in the third quarter, US restrictions on China, falling capacity utilisation and weak semiconductor guidance are likely to pressure demand for gold in technology usage in the fourth quarter, the report added.
Total gold supply in the third quarter increased 1 per cent to 1,215 tonnes as lower recycling offset mine production growth. Mine production was up 2 per cent, with gold mining seeing its sixth consecutive quarter of growth, the WGC said.
In contrast, recycling dropped 6 per cent as consumers held onto their gold in the face of surging inflation and an uncertain economic outlook.