World Gold Council Reports Reduced Central Bank Purchases in Q3 Impact Gold Demand

Global gold demand, excluding over-the-counter (OTC) trading, saw a 6% decline in the third quarter, according to the World Gold Council (WGC). 

This drop was primarily attributed to a decrease in central bank buying compared to record levels seen in the previous year, as well as reduced consumption by jewelry makers.

In the third quarter, global gold demand reached 1,147.5 metric tons, which stood 8% above its five-year average. 

The WGC’s quarterly demand trends report predicts that official sector purchases for the year will approach levels similar to those seen in 2022.

In 2022, gold demand surged to an 11-year high, primarily driven by the most significant central bank purchases ever recorded.

“With geopolitical tensions on the rise and an expectation for continued robust central bank buying, gold demand may surprise to the upside,” commented Louise Street, senior markets analyst at the WGC.

During the third quarter, spot gold prices surpassed the psychological threshold of $2,000 an ounce, reaching $2,009.29. 

This spike was driven by escalating geopolitical tensions, particularly in the Middle East, leading investors to flock to gold as a safe-haven asset.

Investor demand for gold, often seen as a haven during times of instability, increased by 56% in the third quarter. 

However, it remained weaker than the five-year average, as noted by the WGC.

Central bank demand in the same period totaled 337.1 tons, a decline from the previous year’s record of 458.8 tons. 

Nevertheless, the first nine months of 2023 witnessed official sector gold purchases totaling 800 tons, the highest for that period since the WGC began collecting data in 2000.

The report from the WGC suggests that this trend of robust central bank buying is expected to continue throughout the remainder of the year, pointing to a solid annual total for 2023.

In contrast, the demand for gold bars and coins dipped by 14% in the third quarter, primarily due to the lower European market. 

Furthermore, outflows from exchange-traded funds (ETFs) storing gold for investors continued as sentiment favored the expectation of high interest rates.

Including OTC trading, which involves direct transactions between two parties rather than through an exchange, total global gold demand increased by 6% to 1,267.1 metric tons in the third quarter.