Food for thought,"World gold demand fell 11% on the year in the...

Food for thought,



"World gold demand fell 11% on the year in the third quarter, driven by a sharp drop in investor appetite for gold coins and bars and lower consumption in China, the World Gold Council said Thursday.

Third-quarter gold demand totaled 1,084.6 metric tons, down from record levels of 1,223.5 tons in the same period of 2011, the industry body said in its latest Gold Demand Trends report. In dollar terms this equated to $57.6 billion, down 14% from the third quarter of 2011.

The most significant factor in the drop in demand was a fall of 16% in investment demand for gold to 429.9 tons, said the WGC. This was driven by a steep drop in demand for gold bars and coins, which fell 30% to 293.9 tons.

According to the WGC, this decline was "largely a reflection of the strength of demand in 3Q 2011, a period of exceptional investment inflows."

Weaker Chinese demand was also a factor in lower gold demand in the third quarter, it said.

Chinese gold consumption fell 8% in the third quarter to 176.8 tons, led by a 6% and 12% drop in jewelry and investment demand respectively.

According to Marcus Grubb, managing director of investment at the WGC, the slowdown in Chinese demand last quarter came as somewhat of a surprise and was "very much a reflection of the Chinese economy slowing down."

Indian gold demand, on the other hand, improved in the third quarter, rising 9% to 223.1 tons.

India and China are by far the world's biggest gold consumers, jointly accounting for 37% of global gold consumption in the third quarter of this year.

Exchange-traded fund demand was another bright spot in the third quarter, soaring 56% to 136 tons. This was likely driven by rising interest in alternative investment vehicles by the private wealth sector, said Mr. Grubb.

"Large investors are still very concerned about the world economy and financial system," said Mr. Grubb. Gold, which tends to hold its value better than other assets at times of economic instability, is often treated as a traditional "safe haven."

Official sector gold demand, which includes buying from central banks, tumbled 31% to 97.6 tons. From a historical perspective, however, central bank demand for gold remains resilient, with demand over the first three quarter of the year still above the same period of 2011.

The WGC still expects official sector gold demand to total between 450 and 500 tons this year, said Mr. Grubb. Last year, the official sector bought 457 tons of gold.

Global jewelry demand in the third quarter fell 2% to 448.8 tons. Demand for the metal from the technology sector fell 6% to 108.2 tons.

The supply of gold to the market was down year-on-year. Total gold supply in the third quarter fell 2% to 1,188.3 tons, while mine production fell 1% to 731.6 tons."

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Could be the answer to my previous post, that with the general downtrend with the market this week.