Subdued Global Gold Demand Trends Seen in Third Quarter of 2014

Gold demand totaled 929 tonnes in the third quarter. The WGC, which is obviously a pro-gold organization, admitted in the report right up front that the third quarter did prove to be a generally subdued quarter for the global gold market.

Investment demand was up 6% to 204 tonnes, as retail investors continued to digest the 2013 demand surge. The WGC projected that a stable gold price caused investors to hold back. The report said, “A remarkably stable gold price was both a cause and effect of a benign demand environment in the third quarter. Bar and coin investors continued to digest the demand surge of 2013, lacking clear price signals to provide fresh impetus to invest.” That being said, gold bar demand was down 21% and official coin demand was down 16%.

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Central banks were shown as continuing to bolster gold reserves in the third quarter, although the level was down 9% from a year ago for the third quarter. Total central bank net purchases have been 335 tonnes so far in 2014, with third-quarter central bank demand put at 92.8 tonnes. This 335 tonnes so far in 2014 compared to a similar level of 324 tonnes at this time in 2013. The WGC said, “Economic and geopolitical tensions continued to keep central banks on their guard, looking to gold for protection and diversification.”

Jewelery demand is generally considered to be in good health, with third-quarter demand of 534.2 tonnes. This was marginally stronger than the five-year quarterly average of 527.6 tonnes, while year-to-date volumes extended the broad uptrend from the low seen in 2009. Year-on-year comparisons were again heavily influenced by the events of last year: demand was 4% below the third quarter of 2013. The WGC said that this comparison continues to be heavily influenced by the events in 2013, and further said that longer term analysis shows a jewelry market in good health.

Technology demand was not a source of strength, as this fell 5% in the third quarter. The WGC noted that substitution with other metals and compounds continued to be a source of pressure that weakened technology’s demand for gold — from all segments in tech! Overall demand totaled 98 tonnes, but this substitution outweighed the positive influence of improved economic sentiment.

Mine supply during the third quarter contrasted with a global recycling contraction of 25%, with supply down 7%. Mine production marginally increased to exceed 800 tonnes for only the third time, but the drop in recycling was to roughly seven-year lows. Deliveries into existing positions outweighed fresh hedging by 15 tonnes. Overall, third-quarter supply was down 7% from 2013.

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The gold chart below, with prices from BullionDesk, from the WGC pretty much tells the big story here. The WGC is expected to generally talk up the need and value of gold, yet even they put the tone as being a generally subdued quarter.