Global central banks purchased 337 tons of gold in the third quarter, and the World Gold Council forecasts that central banks will continue to maintain strong demand for gold during the year

On October 31, the World Gold Council released a report on global gold demand trends for the third quarter of 2023, showing that the global central bank continued to purchase gold strongly, providing support for gold demand. Gold demand (excluding over the counter) in the third quarter was 1,147 tons, 8% higher than the five-year average.

As one of the important official reserve assets, gold has been increased by central banks for many consecutive months. As of the end of September, China's official gold reserves have increased for 11 consecutive months to 2,192 tons (about 70.46 million ounces), and the increase in the third quarter was 78 tons. According to the World Gold Council,Global central banks bought 337 tons of gold in the third quarter, the third-highest quarterly net purchase on record.

Although it failed to break the record set in the third quarter of 2022, central bank gold purchase demand from the beginning of 2023 to the present has reached 800 tons, setting the latest record since the association's statistics are available. The World Gold Council said,Central banks are expected to maintain strong demand for gold purchases for the rest of the year, indicating that total central bank gold purchase demand is expected to remain strong throughout 2023.

In the third quarter, the domestic gold ETF achieved a net inflow of 4.50 billion yuan

Data show that China's domestic demand for gold jewellery in the third quarter totaled 154 tons, down 6% year-on-year, but up 16% from the second quarter. Domestic demand for gold bars and coins was strong in the third quarter, reaching 82 tons, up 16% year-on-year and surging 66% month-on-month. The rise in gold fever and investors' hedging demand played a key role.

In terms of gold investment, as of the end of September, the asset management scale (AUM) of gold ETF in the Chinese market was 27 billion yuan (about 3.70 billion US dollars), and the net inflow in the third quarter was 4.50 billion yuan (about 600 million US dollars); the position increased by 9.5 tons to 59.7 tons. The inflow of gold ETF in the Chinese market in the third quarter reversed the previous weak situation, and the net inflow since the beginning of the year is about 4 billion yuan (about 500 million US dollars, 8 tons).

Wang Lixin, CEO of the World Gold Council China, pointed out that the main reason for the sharp inflow of gold ETFs this quarter is that the domestic gold price has maintained a high momentum for most of the third quarter, while investors' demand for safe haven in the context of weak stock markets and RMB fluctuations has also continued to rise. In addition, timely promotions by gold ETF issuers are also an important reason.

Looking at the global situation, in the third quarter, total global gold demand (excluding over the counter) was 8% higher than the five-year average, but decreased by 6% year-on-year to 1,147 tons; while total gold demand, including over the counter and inventory flows, increased by 6% year-on-year to 1,267 tons; over the same period, global gold investment demand was 157 tons, an increase of 56% year-on-year. Among them, gold bar and coin investment was 296 tons, a decrease of 14% year-on-year; global gold ETF outflows were 139 tons, a significant decrease compared to the outflow in the same period last year (244 tons).

The World Gold Council pointed out that global gold ETF outflows continued in the third quarter, mainly due to investor sentiment that interest rates will continue to be high. However, over-the-counter investment continued to strengthen, with over-the-counter investment reaching 120 tons in the third quarter, in part due to increased demand from high net worth groups in Turkey and inventory replenishment in other markets.

World Gold Council: Gold demand could experience unexpected growth

In addition, gold, one of the important official reserve assets, has been increased by the central bank for several consecutive months. As of the end of September, China's official gold reserves have increased for 11 consecutive months to 2,192 tons, with an increase of 78 tons in the third quarter. Data show that,Global central banks bought 337 tons of gold in the third quarter, the third-highest quarterly net purchase on record.Although it failed to break the record set in the third quarter of 2022, the demand for central bank gold purchases since the beginning of 2023 has reached 800 tons, setting the latest record since the association had the data.

The World Gold Council says,Central banks are expected to maintain strong demand for gold purchases for the rest of the year, indicating that total central bank gold purchase demand is expected to remain strong throughout 2023.

Louise Street, senior market analyst at the World Gold Council, said gold demand has been resilient so far this year and has performed well despite headwinds from high interest rates and a strong US dollar. Our report shows that gold demand remained healthy in the third quarter compared to the five-year average. Looking ahead, gold demand could grow unexpectedly in anticipation of rising geopolitical tensions and continued strong global central bank gold purchases.

Looking ahead, demand for gold jewellery will remain relatively stable in the fourth quarter, Mr. Wang said. Domestic demand for wedding jewellery, various shopping festivals and holidays may boost jewellery consumption, but higher renminbi gold prices and the late Chinese New Year may delay the traditional peak gold consumption season until early 2024, limiting jewellery demand in the fourth quarter. In terms of gold investment, domestic retail gold demand will remain strong in the fourth quarter.

"Compared with other assets, the year-to-date returns of RMB gold prices are more attractive, coupled with economic and geopolitical uncertainties, which may continue to drive up domestic investors' safe-haven demand. But similar to gold jewelry, the late Chinese New Year holiday may be detrimental to demand growth in the fourth quarter of this year," Wang Lixin said.