By Yusuf Khan
Demand for gold rose during the third quarter, driven by increased buying from central banks as well as consumers purchasing more jewelry, according to a new report.
The World Gold Council said Tuesday that demand for gold was 28% higher year-on-year at 1,181 metric tons, with demand to September up 18% compared with the first nine months of 2021 and back to prepandemic levels.
Much of the demand came from accumulation of gold from central banks, which purchased an estimated 400 tons during the quarter, in what is estimated to be a record volume.
Central banks have been increasing holdings of the precious metal, as rising inflation and other economic headwinds continue to push investors toward safe-haven assets. Turkey, Uzbekistan and Qatar were among the largest reported buyers, the WGC said.
Meanwhile, Indian consumers helped to lift demand for gold jewelry through the quarter to 523 tons--up 10% year on year-- with India alone seeing a 17% increase in buying compared with the third quarter of 2021.
Heraeus Precious Metals said in a note on Monday that the fourth quarter tends to be the best period for gold demand in India, owing to tailwinds from festivals like Diwali and the winter wedding season.
Despite the strength of those two sectors, investment demand fell 47% compared to the third quarter of 2021 to 124 tons. Much of this was led by outflows from exchange-traded-funds with investors cutting holdings in the face of rising interest rates globally as well as the strength of the U.S. dollar.
However, the WGC said that much of the negative sentiment toward gold might now have been "flushed out of investment," suggesting that the impact of further rate hikes and dollar strength could be fading.
"On the three previous occasions when combined selling of futures and ETFs exceeded 400 tons, gold rallied during the following three to six months," the council added.
Write to Yusuf Khan at yusuf.khan@wsj.com
(END) Dow Jones Newswires
10-31-22 2044ET
