6-Year Rarity in Gold Demand on "Cannibalization", India Ban

Summer 2013 gold demand falls short of spring surge, but flow to Asia continues...

 

GOLD DEMAND fell between the second and third quarters for the first time in 6 years, according to the latest Gold Demand Trends report from market-development organization the World Gold Council.

 

Dropping almost 6 tonnes from April-June to 868.5 tonnes, global gold demand between July and September also fell from a year earlier, down more than a third by value from Q3 2012 as prices stood 20% lower on average.

 

"[This was] the first Q2-Q3 drop since 2007," says the World Gold Council, reviewing demand data compiled and supplied by Thomson Reuters GFMS, the leading precious-metals market data consultancy.

 

"Two factors contributed" to this drop in gold demand, the new report explains. First it sees "cannibalization" of Q3 purchases by the surge in Q2 demand, sparked by the sharpest fall in gold prices for three decades during the spring crash. Second, the typically strong Q3 demand from India, formerly the world's No.1 consumer nation, was severely dented by the government's anti-gold import rules, imposed to cut the country's trade deficit, and including a total ban on the import of gold coins.

 

New world No.1 China, however, continued to grow its gold demand on an annual basis, growing Q3 purchases by 18% to nearly 210 tonnes.

 

That compares with Q3 Indian demand of 148 tonnes.

 

"Although momentum in [Asian] markets waned following the exceptional second quarter," says the new Gold Demand Trends report, "year-to-date growth has been remarkable."

 

Globally, the sell-off by large Western investment funds so far in 2013 has been "absorbed" by Asian gold demand, says the World Gold Council, highlighting official trade statistics which point to the flow of metal, out of London storage, onto Swiss refineries, and then on again, in the form of "smaller, retail-friendly denominations of kilo bars and below" to Hong Kong and other Asian trading hubs.

 

Wholesale gold prices rose as total demand fell in the third quarter, rallying 11% from the 3-year lows hit at the end of June.