This will be a quick post to provide an update on the latest global demand for gold bullion. According to World Gold Council, the demand for gold bar and coin was weak in Q3 due to the high gold price. Market research revealed that investors generally look for low gold price as the signal to buy gold bullion. This explains why the demand for gold bullion has been declining since end 2015.
Another cause for the weak demand in the third quarter was a lack of momentum in the price. Following the implosion of Brexit, gold price had surged to a high of USD1365 per ounce in July and maintained around that level for about three months. Long term investors were put off by such high price and this led to declining buying interest of gold bullion.
Year-to-date demand for gold bars and coins amounted to 664.2tonnes, the lowest since 2009. However, demand may improve in Q4 as the price drop results in renewed retailer’s interest in the USA, India and China. The demand for physical looks set to increase in the aftermath of US President-elect, Donald Trump, who advocated trade protectionism. In fact, since his appointment, the US dollar has strengthened significantly, leading to a decline in gold price in the second week of November.
The hike in gold price has witnessed huge drop in demands across all major markets. In India, demand for gold fell for the third consecutive quarter, down 30% to 40.1 tonnes. At just 100.7t, year-to-date demand for bars and coins is the lowest for 12 years. Over in Europe, investment in gold bars and coins fell to an 8-year low of 37.6t in Q3, down 37% from the same period last year. The Brexit has ignited a gold price explosion and this led investors to sell into the gold price rally.
In China, the slowing economy, high property prices and lower incomes combined to result in the Chinese holding more cash. This led to Q3 demand of 41tonnes, down 23%. US gold demand witnessed the biggest decline, almost halved from Q3 2016, down a whopping 43% to 17.4 tonnes.
The recent price dip in early November represents a good buying opportunity for gold bargain hunters. Based on the past year data, USD1300 per ounce seemed to be the support level for gold demand. Wealth builders should seize the opportunity to accumulate gold bullion during gold price corrections and build a diversified wealth portfolio.
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