Nov 16 2006
Gold demand figures for the third quarter 2006, compiled independently for the World Gold Council by GFMS Ltd, concealed a dramatic shift in gold demand over the three month period from July to September. In line with spending patterns during the first half of this year, consumer and trade demand for jewellery and net retail investment was subdued at the beginning of the quarter. But as price movements stabilised later in the quarter and then fell below $600/oz in September, consumer demand surged. The last few weeks of September saw vibrant demand for jewellery and retail investment, particularly in Asia and the Middle East, with Indian imports in September at the second highest monthly level ever (see chart).
With the exception of industrial usage, the demand figures in tonnage terms were all down on the same quarter in 2005, with total demand for gold down 3%, jewellery demand down 4%, investment demand down 10%, and industrial demand up 5% with electronics demand setting a new quarterly record. However, the gold price was, on average, 41% higher than in the same period for 2005.
A stabilising price towards the end of the quarter drove the total demand for gold in Q3 up 37% in value terms on Q305. Demand for gold through jewellery consumption was up 36% in value terms on the same period in 2005, with the majority of demand coming in the latter part of the quarter. Investment demand increased on the back of sustained interest in gold-backed Exchange Traded Funds and related products, with an increase of 28% in value terms. Largely driven by electronics, industrial demand for gold saw a very strong quarter, with a rise of 49% in value terms year-on-year.
James Burton, Chief Executive of the World Gold Council, commented
today: As expected, the price volatility seen at the beginning of the quarter dampened consumer appetite, which was then followed by a stabilisation in the price and a subsequent resurgence in demand from consumers toward the end of the quarter. It is encouraging to see that consumers have become comfortable with prices in the $570 to $600 range, in the same way that they adapted to the price range of $420-$440 in the first half of 2005.
During the quarter both July and August saw gains in overall holdings of gold-backed Exchanged Traded Funds, with only a slight fall in September. This once again indicates that ETFs are primarily being bought by long-term investors.
I am also encouraged to see the strong performance in industrial demand for gold. The role of gold in industry, which accounts for around 12% of total demand, is slowly growing, and it is an area that the WGC is actively supporting. Gold performs vital functions in many areas of everyday life, and its unique properties make it useful in medical applications, pollution control, mobile telephones, laptop computers, and many other things we consider indispensable to our modern lives.