Summer months see lower demand for gold

News Arnulf Hinkel – 15.11.2017

In the third quarter of 2017, demand for gold dropped by 9 per cent year-on-year, and by 12 per cent year-to-date. This was mainly due to the decline in inflows into gold-based ETFs. Rising by 18.9 tonnes in the third quarter of 2017, they still fell short compared to Q3 2016. Demand for gold jewellery also declined in the third quarter of 2017, albeit only slightly by 3 per cent. This development is an effect of the major tax reform in India which had led to a certain degree of hoarding prior to its coming into force on 1 July. At the same time, gold jewellery purchases in China increased by 13 per cent, cushioning the Indian slump.

The reason total demand for gold did not decline by more than 9 per cent in Q3 2017 is the fact that it rose in other areas, with gold bars and coins seeing an increase of 17 per cent to 222.3 tonnes. As with jewellery, the Chinese bullion market proved to be particularly strong, but European demand for physical gold also grew by an impressive 36 per cent, with Germany leading by as much as 45 per cent. A number of central banks also made notable purchases of gold bars in the third quarter: total gold demand rose by 25 per cent. With a share of 90 per cent, the central banks of Russia, Turkey and Kazakhstan were primarily responsible for the rise in global gold reserves by 111 tonnes. The demand for gold in technology and electronics industries also proved strong during the quarter, with a respective 2 and 3 per cent increase year-on-year.

In October 2017, inflows into gold-based ETFs rebounded, resulting in an 8 per cent increase year-to-date. The most important contributors were German gold-based exchange-traded commodities (ETCs), with Xetra-Gold achieving an increase of 49 per cent since the start of 2017.

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