Precious Metals

Gold bar, coin demand worldwide drops sharply in third quarter

Gold bar and coin investment was shunned during the third quarter of 2019 in some world markets as some investors opted to pump resources into gold-backed exchange-traded funds.

Gold bar image courtesy of U.S. Gold Bureau; background image courtesy of Walmart.

Worldwide investments in gold bars and coins during the third quarter of calendar year 2019 dropped sharply to 150.3 metric tons, according to a gold demand report released Nov. 5 by the World Gold Council.

In contrast, investments in gold-backed exchange-traded funds hit a record high. Holdings grew by 258.2 metric tons, to reach 2,855.3 metric tons during the third quarter of 2019. That is the highest level since the first quarter of 2016, according to the report.

The report indicates that the 150.3 metric tons investment in gold bars and coins is the lowest quarterly level since the first quarter of 2008. Cumulative demand in the first three quarters of 2019 compared with the same period in 2018 was at its lowest level since 2009, according to the report.

According to the report, China’s bar and coin demand fell 51 percent to 42.8 metric tons, its lowest level in three years, as the domestic gold price hit a multi-year high. During the period reviewed, the world spot price of gold teetered above $1,500 an ounce and remained there.

Indian bar and coin demand slumped to its lowest level since the first quarter of 2009, with retail investment slipping to 22.3 metric tons, a 35 percent drop from the same period in 2018.

For the first time in 10 years, investors in Thailand, Southeast Asia’s largest gold market, dumped 13.5 metric tons during the third quarter 2019, with the gold “consisting mainly of locally minted bars that were subsequently shipped off to Swiss refineries to be re-refined into higher purity bars for the international market.”

Gold bar and gold demand in the United States was down 2.9 metric tons during the third quarter 2019 compared with the same period in 2018.

“While demand remained relatively soft, and coins in the secondary market continued to be exported to Germany, dealers reported a healthier two-way market with some investors entering the market on recent price dips,” according to the World Gold Council report.

Turkey was the only market in WGC’s dataset where retail investment grew between 2018 and 2019, with demand rising 45 percent, year on year, to 6.7 metric tons.

“The percentage growth, however, was in comparison to a weak third quarter 2018 rather than being due to any genuine strength in underlying retail investment demand,”according to the WGC report. “When compared to the second quarter 2019, demand slumped 32 percent, as many investors took advantage of the increase in the gold price.”

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