Third-quarter gold demand was mostly steady, inching modestly higher on a year-over-year basis, according to a report released Thursday by the World Gold Council (WGC).
Gold prices have strengthened with Comex gold futures now trading at around $1,236 per ounce. The SPDR Gold Shares (NYSEArca: GLD), the largest gold-related ETF on the market, gained 2.4% over the past month.
“Gold demand was 964.3t in Q3, just 6.2t higher y-o-y. Robust central bank buying and a 13% rise in consumer demand offset large ETF outflows,” said the WGC. “Bar and coin demand jumped 28% to 298.1t as retail investors took advantage of the lower gold price and sought protection against currency weakness and tumbling stock markets.”
Demand from central banks and jewelry buyers helped prop up bullion demand in the July through September period.
“Jewellery demand rose 6% in Q3 as lower prices caught consumers’ attention,” according to the WGC. “A growing number of central bank buyers saw demand in this sector rise 22% y-o-y to 148.4t, the highest level of quarterly net purchases since 2015. Technology registered its eighth consecutive quarter of y-o-y growth, up 1%. Sharp outflows in gold-backed ETFs offset growth across much of the gold market.”
More Upside for Gold
The safe-haven status of gold, which has been questioned at various points this year, appears to have been renewed over the past couple of days amid heightened equity market volatility. The recent rally in gold comes amid extreme short positioning in the yellow metal and could force traders that short the yellow metal to cover those positions, likely adding to bullion’s near-term upside. Some market observers are forecasting more upside for gold as the fourth quarter moves along.
Central bank demand for gold in the third quarter reached its highest levels in three years.
“This is the highest level of net purchases since 2015, both quarterly and y-t-d, and notable due to a greater number of buyers,” said the WGC.
Additionally, the SPDR Long Dollar Gold Trust (NYSEArca: GLDW) incorporates a currency swap mechanism to effectively gain exposure to gold paid for in foreign currencies, rather than in dollars. Investors can look to GLDW in environment where the dollar is strengthening.
For more information on the gold market, visit our gold category.
Tom Lydon’s clients own shares of GLD.