Gold demand rises in Q3 due to ETF flows – Commerzbank

The World Gold Council released data on gold demand in the third quarter this week. Taking into account over-the-counter (OTC) transactions, demand increased 5% year-on-year, reaching a record level for a third quarter. The surge in demand was primarily driven by Gold ETFs, which recorded inflows for the first time in 10 quarters. As a result, investment demand more than doubled compared to the same quarter last year, although bullion and coin purchases were lower. By contrast, jewelry demand fell to its lowest third-quarter level since 2000, except for the pandemic year 2020, notes Carsten Fritsch, a commodities analyst at Commerzbank.

Investment demand doubles compared to the same quarter last year

“In the first three quarters, demand for Gold, including OTC transactions, was 3% higher than the previous year’s level. Investment demand exceeded the previous year’s figure despite somewhat lower purchases of bars and coins, because Gold ETFs recorded significantly lower outflows. Jewelry demand and gold purchases by central banks decreased year-on-year after three quarters. However, the latter are on par with 2022, which ended at a record level. “For the year as a whole, the WGC expects investment demand to be higher than the previous year.”

“ETFs should see more inflows due to expected interest rate cuts, high fiscal deficits and highly valued stock markets. However, investment demand in the fourth quarter could be strongly influenced by the outcome of the elections in US Gold purchases by central banks will likely be strong again this year, but not at the levels seen in the previous two years. Jewelry demand is also expected to be lower than the previous year, although. somewhat larger than the WGC previously expected.”

“The data did not provide a viable explanation for the 15% increase in the price of Gold in the third quarter. Rather, it showed that demand for Gold was curbed by the rising price level. This applies in particular to the demand for jewelery and also purchases of Gold by central banks. The increase in demand for Gold in India was due to the reduction in import duty and therefore is unlikely to be repeated. less transparent OTC transactions, Gold demand in the first three quarters was 3% lower than the previous year level Only Gold ETFs provided a positive boost to demand. In the long term, this alone will hardly be enough to. justify the high price level, let alone a further price increase.”

Source: Fx Street

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