Demand for gold up as prices rise 20% in a year

Gold demand in the three months to the end of September increased 5 per cent year-on-year to 1,313 tonnes, a record for a third quarter, driven by inflows into exchange-traded funds.
According to the World Gold Council, the industry body for the gold-mining industry, global ETF inflows were positive for the first time since the first quarter of 2022 as concerns over the polarised US presidential election drove demand for the metal in western markets.
“The reality of rates now really starting to come down, that was another driver and to be honest there is a sort of ‘FOMO’ factor when you’ve got people who probably missed that big leg-up [in price] in the first half,” said Louise Street, the senior markets analyst at the World Gold Council.
ETF inflows accounted for 94.6 tonnes of gold, compared with outflows of 139.1 tonnes in the same period last year.
Prices of the metal have increased more than 20 per cent this year, breaking a succession of records.
At the same time, physical bar and coin investment fell by 9 per cent year-on-year in the third quarter to 269.4 troy ounces, thanks to particularly sharp drops in demand in China, Turkey and Europe.
In China, the fall is compared with a strong third quarter last year when the country’s economic slowdown, centred in its ailing property sector, prompted investors to turn to gold as a safe haven.
However, the country’s latest economic stimulus, along with the fact that China’s own central bank hasn’t reported buying for several months which will have served as a signal for some investors, has assuaged demand for gold.
Turkey’s fall was also against a particularly strong comparator, the World Gold Council said. Consistently high interest rates in the country have also made it harder to invest in the metal, which does not produce a yield.
In Europe, the existence of a weak economy has actually led to selling of physical gold investments, Street said.
“You would expect a weak economy to drive safe-haven demand for gold. You do see that, though I think we’re seeing the other angle of it, which is that people have actually needed to sell their gold to help with the cost of living,” she explained, adding that the consumer research carried out by the group had identified this as a factor in Germany.
However, falling demand for investment into gold bars and coins in several key markets was counterbalanced by rising demand in India.
In a bid to tackle gold smuggling in the world’s second-biggest bullion consumer, India slashed import duties on gold in July. The total customs duty on gold was lowered from 15 per cent to 6 per cent and that on gold doré, a semi-pure alloy of gold and silver, from 14.35 per cent to 5.35 per cent.
Historically, one of the key drivers of demand for gold has been buying from central banks, though this has slowed. In the third quarter, it was down by 49 per cent year-on-year to 186.2 tonnes, which the World Gold Council attributed to the sharp increase in the metals price.
However, net purchases in the year-to-date by such institutions stand at 694 tonnes — below the 2023 record but in line with the same period of 2022.