Categories: General Market Commentary / Precious Metals
Topics: General Market Commentary / General Precious Metals

ETFs continue to drive gold demand in the third quarter

ETFs continue to drive gold demand in the third quarter

But is 10% lower than the same time last year.

Global gold demand reached 993 tonnes (t) in the third quarter (Q3) of 2016, a fall of 10% compared to the same period last year, according to the World Gold Council’s latest Gold Demand Trends report. Net inflows into Exchange-traded products (ETPs) helped drive a sharp increase in investment demand, but this was not enough to offset falls in other areas, notably jewellery and purchases by central banks. 

Total investment demand rose 44% to 336 tonnes (t), with ETP inflows accounting for 146t, as investors continued to build up their strategic allocations to gold. The third successive quarter of  inflows into ETPs – which were dominated by European funds – were predominantly driven by ongoing economic and geopolitical uncertainty,  ahead of the US election today and also in Europe post the Brexit referendum decision, and  in advance of various European elections next year. These flows were further supported by relatively expensive equity valuations and low-yielding sovereign bonds. By contrast, bar and coin demand totalled 190t in Q3, down 36% year-on-year. 

Alistair Hewitt, Head of Market Intelligence at the World Gold Council, commented:

“We continued to see flows into gold-backed ETPs in Q3, taking year-to-date inflows at the end of September to 725t. Institutional investors have looked to hedge against uncertainty stemming from geopolitical risk, including Brexit, the US Presidential race and the potential impact of elections in France and Germany next year. In addition, negative interest rates – a theme ever present this year – continued to underpin institutional demand.” 

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