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Third-quarter gold demand up 15 percent

U.S. gold jewelry demand sees continued weakness

November 19, 2009
Weakness in gold jewelry demand continued to prevail in the United States during third-quarter 2009. "Berge Mansfield" bracelet in 18-karat gold by Judith Ripka. (212) 244-1230 or JudithRipka.com

New York--Total identifiable gold demand for third-quarter 2009 is up 15 percent compared with the second quarter, according to the World Gold Council's (WGC) latest "Gold Demand Trends Report," but the report also indicates gold demand for quarter three has dropped 34 percent on year-earlier levels.

Though gold demand in the third quarter reached 800.3 tonnes, or $24.7 billion, according to report figures compiled independently for the WGC by GFMS Ltd., the WGC said the 34 percent fall over year-earlier levels is due to an exceptionally strong third-quarter 2008, which saw soaring demand in response to the deepening global financial crisis.

To address this, the WGC compared quarter-three 2009 against the five-year quarter-three demand average to 2007, which showed tonnage down 4 percent.

Looking at the sectors that drive gold demand, exchange traded funds and inferred investment fell slightly on a quarter-on-quarter basis, but jewelry, industrial and retail investment demand recorded improvements.

"This quarter's demand trends demonstrate the diverse and robust nature of the gold market, which underpins the gold price," WGC Chief Executive Officer Aram Shishmanian said in a media release. "Early signs of economic recovery and improving consumer confidence have seen jewelry and industrial demand rise relative to last quarter, and the profit taking witnessed earlier in the year has markedly decreased."

Gold jewelry demand was up 17 percent quarter on quarter, due in part to seasonal factors, the WGC said. Gold jewelry demand relative to year-earlier levels, however, dropped by 30 percent.

In the United States, weakness in gold jewelry demand continued to prevail in the third quarter, and total gold off-take was 17 percent below the levels of quarter-three 2008.

While gold demand in most regions was lower year on year, according to the WGC, the exception was China, which recorded 10 percent growth in tonnage over quarter-three 2008. Mainland China saw a 12 percent increase in consumer demand for gold compared with year-earlier levels, reaching a record high of 120.2 tonnes. Gold jewelry demand increased 8 percent to 93.5 tonnes, with strong growth particularly in the 24-karat market.

Identifiable investment demand overall was 227.2 tonnes, a slight increase over quarter-two levels, but down 46 percent from the highs of quarter-three 2008. Retail investment was up 11 percent, but 31 percent lower than in quarter-three 2008. The inflow of inferred investment was 30.7 tonnes, significantly lower than the previous two quarters, while industrial demand recorded its second consecutive quarter of improvement, with quarter-on-quarter demand up 6 percent.

Total gold supply contracted slightly for quarter three, sliding to 833 tonnes, a figure 8 percent lower than in the second quarter and 5 percent below year-earlier levels, the WGC said. Mine supply showed an improvement, however, reaching 670 tonnes. Key factors weighing on supply included an increase in producer de-hedging and a negative contribution from the offical sector, in addition to lower levels of scrap than the previous quarters.
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