The gold price averaged US$1,928 per ounce over the three months to 30 September 2023, which, according to the latest analysis from the World Gold Council, was just 2 per cent below the record high of the previous quarter.
The council attributed the Q3 spike to “historic” buying from the world’s central banks as they continue to hedge against persistent inflationary pressures.
However, the sustained increase in gold prices deterred Australian investors from the commodity, with AUD demand down 44 per cent from post-pandemic highs.
Demand for gold jewellery reportedly dropped 12 per cent while interest in gold bars and coins fell 58 per cent.
Approximately 157 tonnes in net gold investment was reported over the quarter, with less than 1 tonne invested in physically-backed gold ETFs in Australia. However, this was the first quarter of net inflows since the second quarter of 2022.
Joe Cavatoni, market strategist, World Gold Council, attributed weaker demand for gold over the third quarter to further evidence of inflation stickiness.
“Gold investment during Q3 was weak as many economies proved resilient to tighter central bank monetary policies, causing bond yields to rise and the US dollar to strengthen, forces that typically curtail gold demand,” he said.
However, demand is expected to pick up over the December quarter off the back of an escalation in geopolitical tensions in the Middle East and mounting concern over the outlook for the global economy.
“Gold demand has been resilient throughout this year, performing well against the headwinds of high interest rates and a strong US dollar,” Louise Street, senior markets analyst at the World Gold Council, observed.
“Our report shows that gold demand is healthy this quarter, compared with its five-year average. Looking forward, with geopolitical tensions on the rise and an expectation for continued robust central bank buying, gold demand may surprise to the upside.”
Since the breakout in conflict between Israel and Hamas in the Gaza Strip, gold prices have risen to a near-record-high of US$2,006 per ounce.
The World Gold Council said it expects central bank demand to near 2022 highs and potentially test the 2022 total.
Central bank gold purchases totalled just under 1,100 tonnes in 2022 and currently sit at approximately 800 tonnes in 2023.
“Taking stock and looking ahead, it now seems all but certain that central banks are on course for another colossal year of buying,” the council noted in its report.
“The strength of buying has, to some degree, exceeded our expectations. While we were confident that central banks would remain net purchasers in 2022, we thought it unlikely that it would match last year’s record-buying volume.
“Should buying continue to be strong in Q4, the full year total could get closer than we anticipated. Nevertheless, the historically high level of buying in Q4 2022 may be difficult to top.”