Gold demand is falling as spot prices for the precious metal are falling on the world’s markets.
The price of an ounce of gold is just shy of US$1,200, down 7% from $1,288, while the World Gold Council, a trade body for producers and sellers, confirms demand is down 2% in the third quarter of 2014.
Jewellery is the largest market for gold, accounting for more than half of global demand, according to the latest statistics from the council.
However, that demand is still 4% down on the same period last year at 534 tonnes.
India has the biggest appetite for the metal, with more than 60% of all gold for jewellery coming from country.
However, the other traditional market for gold jewellery in China collapsed by 39%.
Investors pull out
Central banks bought 93 tonnes of gold for reserves in the quarter, which was a 9% year-on-year decline but the 15th quarter they were net purchasers of the metal.
Investments produced mixed results. Demand for gold bars, coins and exchange traded funds (ETFs) was up 6%, but calls for bars and coins for investment slumped by 21%. The traditional largest markets for bars and coins are the Middle East and Asia.
Businesses buying gold to integrate in technology also bought less of the metal in the quarter. Demand was down 5%. The council blames cheaper alternative materials for the reduction.
Over the quarter, gold supply was down 7% year-on-year to just over 1,000 tonnes. Recycling also slumped 25% to 250 tonnes to the lowest level since 2007.
The council explained that the drop in demand for gold reflected a rebalancing of the market after some years of exceptional gains and that many of the figures were on trend for five year averages.
Rebalancing market
Marcus Grubb, Managing Director of Investment Strategy at the World Gold Council said: “The market for gold is still adjusting after an exceptional 2013, with demand in China slowing but to more normal levels and the run up to Diwali in India fuelling extra jewellery purchases.
“Demand for gold in India is still finding a way back after the government introduced import barriers and extra duties this time last year to slow the market.
“The market and price for gold fluctuates around the world as people buy the precious metal for differing reasons at different times. The market is volatile and self-regulates according to demand and geopolitical and economic issues of the time.
“Because the price is lower and may still fall, recycling has become less cost-effective and mining output has dropped to constrain supply until demand picks up again.”
Download the full report from the World Gold Council for Q3 2014
