Uncertainty in Britain, Europe and North America because of Brexit and US Presidential election fears have knocked back the demand for gold.
The call for the precious metal dropped by 10% for the third quarter of 2016, compared to the same period last year.
Only steady investment in exchange trade products (ETPs) kept demand afloat, said trade body The World Gold Council, noting sales of jewellery and stocks going to central banks fell away sharply.
Broken down, bar and coin sales were down 36% year on year.
The world’s leading consumer gold markets in China and India both faltered. Demand was down 22% in China and 28% in India.
Hedge against risk
Worldwide, the demand for gold jewellery slumped 21% compared to the same quarter last 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 725 tonnes.
“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.”
He explained the key figures for the quarter were:
- Total gold demand down from 1,105 tonnes in September 2015 to 993 tonnes a year later
- Consumer demand collapsed 26% from 917 tonnes to 683 tonnes
- Investment demand soared 44% from 336 tonnes to 232 tonnes
- Jewellery demand waned 21% from 622 tonnes to 493 tonnes
- Central bank demand halved from 168 tonnes last year to 82 tonnes
- Technology demand was flat – down 1% from 82 tonnes last year
- Supply grew 4% to 1,173 tonnes, mainly due to a rise in recycling
“The core physical markets of India and China continued to suffer under high prices and squeezed incomes in Q3, but it looks like Q4 may be better,” said Hewitt.
“Price expectations have always been a key trigger for gold purchases and consumers responded quickly to the price drop in early October. And in the case of India, the first healthy monsoon in three years will boost rural incomes, supporting demand during the festive and wedding season.”