In the World Gold Council’s (WGC) latest quartley report on demand trends some interesting statistics were revealed which generally show a maturing in the gold market, especially in the geographical spread of demand and mine supply. We learn that third quarter gold demand increased a healthy 6% year-on-year to just over a thousand tonnes. A strong rise in investment demand was the main driver of overall demand and jewelry demand declined.
DEMAND:
This investment demand has helped gold outperform most other assets over the near term, delivering gains of 8% over the quarter and 15% over the year-to-date. What caught our attention was the nature of this investment demand, in comparison to previous gold market activity. The WGC report that:
‘The increase in investment demand during the third quarter was notable for its widespread geographical distribution. Virtually all markets saw strong double-digit growth in demand for gold bars and coins, with only three countries, India, Japan, and the US, experiencing a year on years contraction. These growth rates are all the more remarkable when considering the substantial bout of profit-taking which accomplished the price correction in September.’
It is encouraging to see that the investment demand base for gold is now well geographically diversified. Some analysts talk of differing business cycles unfolding in different geographies. As the far right column in the graph above shows, gold investment demand has a healthier looking geographical spread compared to that found during the top of the last gold market in 1980 (second column in from the left) where the market was predominantly driven by North America and Europe. The WGC find this geographical demand can be differentiated in motives and goals, commenting:
‘Western investors were attracted to gold’s insurance-like properties, given the worrying developments in the euro area. Meanwhile, investors in the Eastern markets focused on positive price expectations for gold as well as its inflation-hedging properties.’
Whatever the true motivation of various global market participants are the numbers continue to impress. What we found most notable within the growing gold investment demand, was the rebalancing of global participation in this market. North America and Europe were shown to have previously had a combined share of 47% of the global market in…
