Private Gold Investing Jumps on Half-Decade Low in Price

[The Machine]

 

 

Retail gold investment up worldwide, scrap sales fall, but ETFs shrink again...

 

GOLD INVESTMENT demand amongst private households jumped on the new 5-year low in prices during the third quarter, says new data released today.

 

Coupled with a smaller rise in gold jewelry demand, figures from market-development organization the World Gold Council say that total global gold demand grew 8% by weight from Q3 last year.

 

But total gold demand fell 6% by Dollar value as prices fell for the 5th quarter in a row – the longest stretch since 1996-97.

 

 

Globally, according to today's new Gold Demand Trends report, total gold investment demand rose 27% by weight from Q3 last year, and grew 11% by Dollar value.

 

The rise was led by demand from private households for small gold bars (up 20% to 199 tonnes) and for "official coin" (up 111% to 76 tonnes) such as American Gold Eagles and Austrian Philharmonics.

 

Investment through gold-backed exchange-traded trust funds, in contrast, continued to fall, shedding almost 66 tonnes for the 10th drop in the last 11 quarters.

 

At the end of Q3 2015, some 35% of the largest gold ETF's shares, the SPDR Gold Trust (NYSEArca:GLD), were owned by institutional investment funds and money managers, down from 47% at the trust's peak bullion holdings by weight of end-2012.

 

Barring a 25-tonne rise in the first 3 months of 2015, gold ETF products have now sold metal – returned to market as shareholders liquidated stock and so cut the size of holdings needed to back the value of the trust funds – every quarter since the start of 2013, shedding 1,120 tonnes in total.

 

That equal more than one-third of the world's current record annual gold-mine output.

 

Small gold bar and coin demand, on the other hand, reached its highest quarterly total since 2010 in the United States, while China's private gold investment demand rose 70% year-on-year in the third quarter says the major-miner backed World Gold Council's report, based on data from specialist analysts Metals Focus.

 

"Queues began to resurface at retail shop fronts when the gold price breached $1100 in mid-July," said last month's Q3 report from Thomson Reuters GFMS – pegging China's retail investment 10 tonnes lower than the Metals Focus data at 42 tonnes – "having been largely absent since the demand surge of 2013," when gold prices fell at the fastest pace in three decades.

 

Central banks also remained strong buyers as a group on the third quarter's price drop, the World Gold Council says, marking the 19th consecutive quarter of net purchases by "almost matching the record highs in Q3 2014" with aggregate demand of 175 tonnes.

 

But industrial demand for gold – notably in chips, bonding wire and LED lights for the electronics sector – fell 5% annually in Q3 as "substitution and thrifting continue to diminish gold’s use...now further dampened by a slowdown in the sales of finished products."

 

On the other side of the market, newly mined gold grew 3% per year to 848 tonnes between July and October – some 14% above the mining sector's 5-year quarterly average output.

 

So-called "scrap" flows of gold sold by households, investors and industrial users meantime fell 6% year-on-year according to the World Gold Council data, dropping to the lowest quarterly level since Q3 2008 at 252 tonnes.

 

July's price fall "meant most price-sensitive consumers were inclined to hold onto their gold rather than sell [with] diminished recycling...dominated by consumer behaviour in North America."

 

Higher gold prices in Indian Rupee terms saw gold sales for recycling rise "marginally". Households in Turkey – formerly the world's 4th largest consumer nation, but overtaken in Q3 by Thailand and Germany on the World Gold Council data – kept recycling levels "subdued [despite] the weakness of the Turkish Lira lift[ing] local gold prices...due to expectations of further price appreciation."

 

Thomson Reuters GFMS' figures – published 2 weeks earlier than the World Gold Council data, in late-October – said global scrap flows rose 3% annually in Q3 to reach 281 tonnes.

 

Compared with the last 2 years' quarterly average however, recycling flows in the third quarter stood more than 3% lower on GFMS' data series.