by | Nov 10, 2020 | Precious Metals

The global investment demand for gold in Q3 was significantly higher than this time last year, said the World Gold Council (WGC) in its Gold Demand Trends Q3 2020 report. Specifically, investment in gold-backed ETFs surged to an all-time high during this quarter. In addition, according to the data, gold bar and coin investment leapt 49% y.o.y. However, the repercussions of the global COVID-19 pandemic have impacted the physical demand for the precious metal, specifically in the jewelry sector. 

Global Gold Demand Trends

The World Gold Council highlighted its findings on gold demand trends for this quarter.

“Demand for gold dropped to 892.3t in Q3 – its lowest quarterly total since Q3 2009 – as consumers and investors continued to battle the effects of the global pandemic. At 2,972.1 tonnes year-to-date (y-t-d) demand is 10% below the same period of 2019.

Although jewellery demand improved from the Q2 record low, the combination of continued social restrictions, economic slowdown, and a strong gold price proved onerous for many jewellery buyers: demand of 333 tonnes was 29% below an already relatively anaemic Q3 2019.

By contrast, bar and coin demand strengthened, gaining 49% y-o-y to 222.1 tonnes. Much of the growth was in official coins, due to continued strong safe-haven demand in Western markets and Turkey, where coins are the more prevalent form of gold investment. Q3 also saw continued inflows into gold-backed ETFs, although at a slower pace than in the first half. Investors globally added 272.5 tonnes to their holdings of these products, taking y-t-d flows to a record 1,003.3 tonnes.

Central banks generated small net sales of gold in Q3, the first quarter of net sales since Q4 2010. Sales were generated primarily by just two central banks – Uzbekistan and Turkey – while a handful of banks continued steady albeit small purchases.

Demand for gold used in technology remained weak in Q3, down 6% y-o-y at 76.7 tonnes. But the sector saw a decent quarterly improvement as some key markets emerged from lockdown.

The total supply of gold fell 3% y-o-y in Q3 to 1,223.6 tonnes, despite 6% growth in gold recycling, with mine production still feeling the effects of the H1 COVID-19 restrictions.”

Given the tumult and uncertainties instigated by the global pandemic, it is unsurprising that there has been historic investment demand for the glittering precious metal.

“What we are seeing in the gold market is what one would expect as the world continues to feel the effects of the COVID-19 pandemic. Gold is doing what it is supposed to do. Gold’s role in financial markets is not going away anytime soon. The environment of uncertainty has been well established and has only been exacerbated by the coronavirus,” explained Juan Carlos Artigas, head of research at the World Gold Council in an interview.

Gold Investment Demand

Although the COVID-19 pandemic may have significantly impacted the physical demand for gold around the world, investment demand within the space has surged in Q3 based on the World Gold Council report.

“Global investment demand for gold (incorporating retail investment in gold coins and small gold bars as well as inflows into gold-backed ETFs) reached 494.6t in Q3. This was 21% higher than the Q3 2019 total.

Bar and coin investment saw widespread y-o-y growth, in some contrast to Q2 when disinvestment was commonplace across Eastern markets. Thailand was the most notable exception, where selling of existing gold investments continued apace as a means of relieving the economic hardship arising from the pandemic. 

The strong rise in the gold price to record highs in early August attracted a certain degree of momentum investing, while the continued global economic stress due to the global pandemic underpinned gold’s role as a risk hedge and protector of wealth. The ongoing low-to-negative rate environment also remained firmly in gold’s favour.” 

Demand For Gold ETFs 

The World Gold Council reported that investors were particularly drawn to gold-backed ETFs (exchange-traded funds). The council found that quarterly inflows increased by 272.5 tonnes in the third quarter, with total gold holdings around the world reaching a new record of 3,880 tonnes.

“Although still substantial, the rate of increase was lower than the first half of 2020, when 300t were added in the first quarter and 431t in the second. During the first nine months of the year in total, 1,003t were added globally: inflows in Q3 marked the eighth successive quarter of net inflows into gold-backed ETFs,” explained the WGC report.

Global Bar And Coin Investment

The global demand for gold bars and coins skyrocketed 49% y.o.y. during the third quarter stated the World Gold Council. According to the report findings in the United States alone, gold bar and coin demand rose to 19.2 tonnes. This marked the strongest quarter since Q4 2016.

“The majority of the countries we track saw sequential improvements in bar and coin demand in Q3 as economies began to emerge from lockdown and the supply chain bottlenecks seen earlier in the year eased. Following this strong quarterly recovery, y-t-d bar and coin demand was flat compared with the same period in 2019, even after the weakness seen earlier this year. The value of bar and coin demand – US$34.9bn y-t-d – has increased sharply due to gold’s strong price performance this year,” explained the WGC in their report.

Juan Carlos Artigas, head of research at the World Gold Council provided further insight into the demand for bars and coins.

“I think this shows that although consumers aren’t buying a lot of gold, they aren’t quick to sell it either. People are starting to see long-term value in gold, and that is an important support for the market,” Artigas explained in an interview.

Central Banks Were Net Sellers 

Another important finding in the World Gold Council report was that for the third quarter, Central Banks were modest net sellers of 12 tonnes. The WGC noted this marked the first time since the beginning of 2011, that central banks have been net sellers of gold.

Historically, gold has proven to be a consistent hedge against economic uncertainty and turmoil. That said, it is unsurprising that investors are flocking to the glittering precious metal. There has never been a better time than now to allot a portion of your portfolio to gold. For those interested, here are our top companies for gold investment and storage to get a better understanding of the space. Additionally, for those investors interested in gaining exposure to gold through an IRA, have a look at our top 10 Gold IRA companies and top Precious metals IRA company reviews for more information about your investment options. Remember, always do your due diligence and consult a financial professional before making investment decisions.

Sarah Bauder

Sarah Bauder is a financial writer with over a decade of experience at numerous online publications, writing about alternative investments, retirement, US politics, world economy and more.