Gold demand rises as investors grow nervous - WGC

LONDON (Reuters) - A slew of investment in gold-backed exchange traded funds (ETFs) offset a decline in purchases of jewellery, bars and coins to push global gold demand slightly higher in the third quarter, the World Gold Council (WGC) said on Tuesday.

A sales assistant takes out a gold ornament for a customer at Caibai Jewelry store, in Beijing, China, August 6, 2019. REUTERS/Jason Lee/Files

The world’s appetite for gold was 1,107.9 tonnes over July-September, 3% more than in the same period last year, the WGC said in its latest Gold Demand Trends report.

That took demand in the first three quarters to 3,317.5 tonnes - the most for any January-to-September period since 2016, it said.

“The continued surge into ETFs more than compensated for weaker demand elsewhere,” said the WGC’s head of market intelligence, Alistair Hewitt.

Gold is traditionally seen as a safe investment in uncertain times, and the worsening health of the global economy triggered a flood of interest from financial investors such as asset managers and hedge funds.

Holdings of gold-backed ETFs rose by 258.2 tonnes during the third quarter and touched a new all-time high, the WGC said.

But with gold prices XAU= rocketing to six-year highs in dollar terms -- and even higher peaks when priced in other currencies that have weakened against the dollar -- retail consumers were put off.

Demand for jewellery at 460.9 tonnes in the third quarter was down 16% from the same period a year ago, while purchases of bars and coins halved to 150.3 tonnes, the WGC said.

Hewitt forecast full-year consumption in China at 850-950 tonnes and in India at 700-750 tonnes, down from predictions of 900-1,000 tonnes and 750-850 tonnes three months ago.

Central banks added 156.2 tonnes to their reserves in the third quarter, down sharply from July-September last year, the WGC said.

However, central bank demand over the first nine months of the year at 547.5 tonnes is still 12% up from last year and Hewitt said full-year purchases would likely be between 600 and 700 tonnes -- on a par with last year’s more than 50-year high of 651.5 tonnes.

Supply of gold rose 4% to 1,222.3 tonnes in the third quarter thanks to surge in recycling to its highest level since 2016, the WGC said.

Reporting by Peter Hobson; Editing by Emelia Sithole-Matarise