Investors are focussing on stock markets instead of gold to take advantage of strong share prices and rising global growth.
Gold demand has seen huge outflows in the past 12 months – with investment falling by a fifth from 246.2 tonnes in the third quarter last year to 194.9 tonnes a year later.
Most of the collapse was in gold-backed exchange traded funds (ETFs).
In Q3 2017, investors purchased ETFs backed by 13.2 tonnes of gold, while a year later, this has plunged to taking 103.2 tonnes out of the market.
Trade body The World Gold Council saysthe figures mostly result from American investors switching their allegiance to equities.
Central banks stockpile gold and sell dollars
In the report for Q3, the council explained September was the fourth month in a row that investors shunned ETFs – the longest period of monthly outflows since 2014 and wiping out gains made earlier in the year.
Elsewhere, demand for gold coins and bars was up 28%, boosted by a 25% increase in China and a five-year high in Iran.
Other high spots in the report were a 22% year-on-year increase in gold reserves held by central banks with net purchases of 148 tonnes. The main buyers were Russia, Turkey and Kazakhstan.
Russia is pursuing a policy of selling US dollar reserves.
First Deputy Governor Dmitry Tulin stated that gold is “a 100%t guarantee from legal and political risks.” He also confirmed the country’s ‘de-dollarisation’ will continue.
Gold mining hits a new record
Gold demand for jewellery showed a slight increase of 6%, while gold for technology stood still with a 1% rise.
Gold production was up in Q3 by 1.9% to 875.3 tonnes – the highest level of quarterly production recorded and above the five-year quarterly average of 809 tonnes.
“Mine production has now registered six consecutive quarters of year-on-year growth, building on renewed optimism for the sector,” said the report.
“A combination of growth from key producing countries – such as Russia and Canada – as well as the improving production pipeline, will be supportive of further growth in 2018. The declining production profile of two or three years ago has since shifted to a more robust picture for the industry.”