Middle East and Asia lead a hungry consumer market for gold

Consumer demand for gold jewellery – led by buyers in Asia and the Middle East – rose by 5 per cent in the third quarter and was especially strong in the UAE

Demand dropped to 868.5 tonnes in the July-to-September quarter, from 1,101.4 tonnes in the same period last year. Duncan Chard / Bloomberg

Global consumer demand for gold jewellery – led by buyers in Asia and the Middle East – rose 5 per cent to 487 tonnes in the third quarter from 462 tonnes a year ago, a report from the World Gold Council (WGC) showed yesterday.

Demand in the Middle East was especially strong in the UAE, Saudi Arabia and other Arabian Gulf nations. Buyers preferred 22-carat gold at the expense of 21-carat and 18-carat diamond-set jewellery.

This emphasis suggested that “demand was stronger among domestic consumers relative to western tourists”, the report said. “Heavy promotion by big brand names resulted in major retailers performing better than smaller retailers.”

Demand in Egypt shrank as an uncertain political climate prevailed.

Overall global demand for gold fell 21 per cent in the third quarter as investors dropped holdings of the metal in exchange-traded funds (ETFs) and central banks eased up on purchases.

Demand dropped to 868.5 tonnes in the July-to-September quarter, from 1,101.4 tonnes in the same period last year, the WGC said.

Appetite for the metal, typically seen as a safe investment, has waned this year as stock markets improved and investor demand for riskier assets increased.

Investors withdrew 118.7 tonnes of gold from ETFs in the third quarter and central bank purchases slipped 19 per cent to 93 tonnes, according to the WGC.

“Investors have lightened their holdings in gold, and we saw a flight to riskier assets like equities,” Marcus Grubb, the managing director of investment at the council, told Bloomberg.

Consumer demand was strongest in China, where it increased 29 per cent to 164 tonnes in the third quarter compared with a year ago.

“The vast bulk of the year-to-date growth in consumer demand for gold came from eastern markets,” the WGC said.

In India, government regulations curbed enthusiasm – consumer demand slumped 32 per cent from the same quarter last year.

However, Indian demand for gold since the start of the year has risen 19 per cent from last year, following the surge sparked by two price declines earlier in 2013.

The global price of gold has fallen 23 per cent this year and yesterday traded at US$1,284.29 per ounce. It reached an all-time high of $1,921.15 in September 2011.