Improved buying boosts UK gold demand by 18% in Q3

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World Gold Council figures show last quarter demand totalled £121m.

Gold demand trend figures for Q3 2014, as compiled by the World Gold Council (WGC), have revealed ongoing growth in UK demand for gold, with an 18% year-on-year increase in the third quarter.

The jewellery sector remains the key driver of gold demand in the UK, with consumers responding to lower-priced stock and improved product selection. According to the WGC, this is the result of retailers taking advantage of lower international wholesale prices, building their product offer and stock ahead of the Christmas sales period.

According to the WGC data, the UK increase recorded in Q3 represents the fifth consecutive year-on-year rise in UK jewellery demand.

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In total, UK consumer demand for gold hit 4.6 million tonnes in Q3 2014, an 18% increase compared to the same period in 2013, with a total value of $190 million (£121m), up from $166 million (£106m) in Q3 2013.

For the 12-month period ended Q3 2014, UK gold demand had totalled $1.05 billion (£671m), totalling 25.5 tonnes.

GLOBAL GOLD DEMAND
At a global level, total global demand for Q3 was down 2% year-on-year to 929 tonnes.

Overall jewellery demand softened slightly down 4% to 534 tonnes, when compared with "an exceptional quarter in 2013". With a the long term in mind, the WGC says Q3 2014 jewellery demand was marginally stronger than the quarterly average of 527.6 tonnes, and year-to-date volumes continue to drive the upwards trajectory for gold demand recorded since 2009.

Elsewhere, Indian jewellery demand represented a 60% year on year increase to 183 tonnes in Q3 2014, the second highest Q3 on record for the country. While the increase is partly reflective of the weakness in Q3 in India last year – when the government introduced import curbs and raised import duties – the WGC says it also demonstrates resilience in India’s appetite for gold jewellery. Improved consumer confidence in both the domestic economy and the new government added to the positive sentiment, with strong levels of purchasing being seen in the build up to Diwali.

In China jewellery demand for Q3 2014 was down 39% year on year to 147 tonnes, but was broadly in line with both Q3 2012 and the five-year quarterly.

US jewellery demand grew 4% year on year to 34 tonnes, the highest Q3 since 2009.

The WGC managing director of investment strategy Marcus Grubb said: "This quarter the market continued to find its feet after an exceptional 2013, with China catching its breath and buying in the build up to Diwali driving Indian jewellery purchases. The figures for India and China this quarter reinforce the need to understand the factors which underpinned an exceptional Q3 last year. In 2013, India was impacted by import curbs and increased import duties imposed by the previous government, whereas exceptional buying in China during the same period shaped buying patterns in 2014.

"The long-term sources of demand – jewellery, investment, central banks and technology remain robust and diverse. People around the world buy gold for different reasons at different times, reinforcing the unique self balancing nature of the gold market. With recycling at a seven year low and mine supply looking increasingly likely to be constrained in the future the outlook for physical gold demand remains strong.”

In terms of supply, total gold supply fell by 7% in Q3 2014, continuing the broad themes surrounding gold supply during the first half of the year. Mine production stabilised, with 1% growth to 812 tonnes, but recycling slowed considerably, reaching its lowest year to date levels since 2007 at 807 tonnes.

GOLD DEMAND AND SUPPLY STATS FOR Q3 2014
• Gold demand for Q3 2014 was 929t, down 2% year on year from 953t.
• Central bank purchases declined 9% year on year, to 93t from 101t.
• Total bar and coin demand fell by 21% year on year, to 246t from 312t.
• ETF outflows were 41t, compared to 120t in the same period last year.
• Total jewellery demand fell by 4% year on year, to 534t from 556t.
• Technology declined by 5% to 98t compared to 103t in Q3 2013.
• Total supply fell by 7% to 1,048t compared to 1,129t in the same period last year.

The Q3 2014 Gold Demand Trends report, which includes comprehensive data provided by GFMS, Thomson Reuters, can be read in full here.

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