Pandemic smashes Q3 gold demand 19% lower on year: WGC

New York — Global gold demand in Q3 dropped by 19% year on year to 892 mt, as consumers continued to feel the impact of the COVID-19 pandemic, according to industry lobby group the World Gold Council, marking the lowest quarterly figure in 11 years.

Year-to-date demand of 2,972.1 mt was 10% lower versus the same period in 2019, according to the WGC's latest Gold Demand Trends report, with investment growth offering the only glimmer of support.

Q3 saw investment demand up 21% year on year. Investors globally bought 222.1 mt of gold bars and coins and an additional 272.5 mt through gold-backed Exchange Traded Funds. So far in 2020 gold ETFs have increased holdings by a record 1,003.3 mt.

"However, the combination of continued social distancing restrictions in many markets, the economic slowdown, and a record high gold price in many currencies proved too much for many jewelry buyers," the council said.

Record high dollar price

The US dollar gold price rose to a record high of $2,067.15/oz in early August, as investors fretted over the outlook for the global economy in the wake of the pandemic. This was followed by a pullback with the price closing the quarter around $1,900/oz, largely down to profit-taking and dollar strength.

Record-high prices were also seen in various other currencies, among them the Indian rupee, the yuan, the euro and sterling. China and India are the world's largest physical buyers of gold and are sensitive to price fluctuations for physical metal.

Pandemic hammers physical demand

"The effects of the pandemic further impacted the jewelry sector. The weakness caused by COVID-19 was compounded by record gold prices: Q3 demand fell 29% year-on-year to 333 mt. While China and India accounted for the largest volume declines, weakness was global," the report said.

Adding to the demand pressure, central banks were sellers in Q3, offloading 12 mt of gold during the quarter. This was the first quarter of net sales since Q4 2010.

"The impact of COVID-19 is still being felt in the gold market across the world. The combination of continued social restrictions in many markets, the economic impact of lockdowns, and all-time high gold prices in many currencies proved too much for many jewelry buyers. We believe that this trend will likely continue for the foreseeable future," Louise Street, lead analyst at WGC, said.

Key findings included in the Gold Demand Trends report for Q3:

-- Overall demand declined in Q3 by 19% year-on-year to 892 mt

-- ETF inflows investors globally added 272.5 mt to their holdings, taking global holdings to a new record of 3,880 mt

-- Bar and coin demand increased by 49% year-on-year to 222.1 mt

-- Global jewelry demand improved from a record low in Q2, but declined by 29% year-on-year to 333 mt

-- Central banks were net sellers of 12 mt, the first quarter of net sales since 2010

-- Demand in the technology sector fell by 6% year-on-year to 76.7 mt

-- Total supply declined 3% year-on-year