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Global gold demand reflects challenging global economic climate

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Global gold demand in quarter three 2012 was 1,084.6 tonnes, down 11 per cent from the record Q3 2011 figure of 1,223.5t.  

This dip in demand is in comparison with exceptional demand in Q3 last year. Gold demand remains resilient. Q3 2012 was above the five year quarterly average of 984.7t, according to the World Gold Council’s Gold Demand Trends Report.

In value terms gold demand was 14.0 per cent lower year on year at USD57.6bn and the average gold price of USD1,652/oz was down three per cent on the record average Q3 2011 price.
 
Global investment in gold ETFs over the quarter was up significantly by 56 per cent on the previous year.

The Indian market is showing signs of recovery, up nine per cent to 223.1t from 204.8t in Q3 2011 following increases in both jewellery and investment demand. In comparison with Q3 2011 jewellery demand was up seven per cent to 136.1t and investment demand rose by 12 per cent to 87.0t. Investors moved into the imitation coin market, up 59 per cent, whilst jewellery increased due to re-stocking ahead of the Indian wedding and festival season. Indians appear to have acclimatised to recent price trends and have been buying into a rising market.

In China demand fell eight per cent to 176.8t in Q3 2012 from 191.2t in Q3 2011 due to falls in jewellery of six per cent and investment of 12 per cent mainly as a result of negative sentiment surrounding China’s slowing economy. Jewellery demand was 123.8t in Q3 2012, due to a decline in purchases of 18k pieces and a notable slowdown in the expansion of the retail network, as stock-building reduced. Investment demand was down to 53.0t Demand this quarter remains 19 per cent above the longer term average.

Central banks bought 97.6t in the quarter. In six out of the last seven quarters, central bank demand has been around 100t, which is a sharp increase from as recently as 2010. The year to date figure for central bank buying is up nine per cent.

Marcus Grubb, managing director, investment at the World Gold Council, says: “Gold is beginning to re-establish itself as part of the fabric of the financial system. In the medium term, the quantitative easing initiatives in the West and the continuing growth story in the East, particularly in India and China, coupled with the seasonally strong quarter coming up in Asia, are excellent indicators for further growth in the gold market.

“Against a backdrop of continued global economic uncertainty and elections in China and the US, it is clear from five year rising demand trends that gold’s fundamental property as a vehicle for capital preservation continues to endure, as evidenced by this quarter’s increase in global ETF investment, up 56 per cent and continued purchasing by central banks, the ultimate long term investors.”

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