The World Gold Council's latest Gold Demand Trends report reveals that global gold demand (excluding OTC) in the third quarter of 2022 hit 1,181 tonnes, up 28% year-on-year. Strong demand pushed the year-to-date total to its pre-COVID levels. Gold demand was bolstered by consumers and central banks, although there was a notable contraction in investment demand.
Q3 2022 consumer demand for gold in Thailand increased 40% year-on-year, from 8.6t in Q3 2021 to 12.1t in Q3 2022. The higher demand was supported by a 35% year-on-year increase in jewellery demand from 1.9t in Q3 2021 to 2.5t Q3 2022, and a 42% year-on-year increase in bar and coin demand from 6.7t in Q3 2021 to 9.6t in Q3 2022.
Andrew Naylor, Regional CEO, APAC (ex-China) at the World Gold Council, said: "This is the longest streak of consumer demand growth and seventh consecutive quarter that we've seen a rise in jewellery consumption in Thailand. These have been a result of a revival in tourism and lower gold prices which encouraged gold retailers to replenish their stocks in expectation of continued healthy demand in the fourth quarter as they look ahead to the wedding season and year-end festivities."
Globally, investment was down 47% year-on-year, as ETF investors responded to a challenging combination of markedly higher interest rates and a strong US dollar with significant outflows of 277t. These movements, alongside weakness in OTC demand and negative sentiment in futures markets, hampered gold's price performance - contributing to an 8% quarter-on-quarter drop in the price during Q3 2022.
Despite these headwinds, gold continued to hold favour with retail investors who reacted to different market cues and turned to gold for its status as a store of value amidst rampant inflation and geopolitical uncertainty. Investors sought to hedge inflation with bar and coin investment, driving total retail demand up 36% y-o-y. This was supported by significant purchasing in Turkey (up more than fivefold y-o-y) and in Germany (up 25% y-o-y at 42t), but also from visible contributions across all major markets.
Jewellery consumption continued to rebound and is now back to pre-pandemic levels, reaching 523t - 10% higher compared to Q3 2021. Much of this growth was spearheaded by India's urban consumers who drove up demand 17% y-o-y to 146t. Similarly impressive growth was also seen in much of the Middle East, with Saudi Arabian jewellery consumption up 20% since Q3 2021, and United Arab Emirates up 30% for the same period. Chinese jewellery demand also saw a modest 5% increase y-o-y driven by improved consumer confidence, a dip in the local gold price in July and the release of some pent-up demand.
Just as consumer gold demand firmed, central bank buying picked up significantly with estimated record purchases of nearly 400t in the third quarter. This pattern reflects insights from our recent central bank survey, in which 25% of respondents said they intended to increase their gold reserves in the next 12 months.
Turning to supply, mine production (net of hedging) was up 2% versus Q3 2021, with gold mining seeing its sixth consecutive quarter of growth. By contrast, recycling was 6% lower y-o-y in Q3, as consumers held onto their gold in the face of surging inflation and an uncertain economic outlook.
Louise Street, Senior Markets Analyst at the World Gold Council commented:
"Despite a shaky macroeconomic environment, demand this year has reflected gold's status as a safe haven asset, underscored by the fact that it has outperformed most asset classes in 2022.
"Looking ahead, we anticipate central bank buying and retail investment to remain strong and that could help offset potential declines in OTC and ETF investment that may prevail if the dollar strength persists. We also expect to see jewellery demand continue to perform strongly in some regions such as India and Southeast Asia, while the technology sector will likely witness further decline in the face of economic deceleration."
The Gold Demand Trends Q3 2022 report, which includes comprehensive data provided by Metals Focus, can be viewed here: https://www.gold.org/goldhub/research/gold-demand-trends/gold-demand-trends-q3-2022