Central Bank Gold Demand Surges in Q3 Amid Global Turmoil

The third quarter of 2023 witnessed a robust appetite for gold among central banks worldwide, as indicated by their acquisitions totaling 337 metric tons, according to the World Gold Council’s (WGC) latest report. Analysts from the council suggest that this consistent central bank activity reflects sustained and robust demand for gold, potentially leading to another strong year-end total for 2023.

World Gold Council Report Highlights Central Banks’ Increased Gold Holdings Amid Economic Uncertainty

The reported figure of 337 metric tons of gold came close to,

but did not surpass, the record set in the third quarter of 2022. Nevertheless, it propelled year-to-date purchases to a record high of 800 metric tons. The WGC report underscores that such steady central bank activity underscores ongoing demand for gold, hinting at a potentially robust year-end total for 2023.

On Friday, the price of gold per ounce reached a peak of $2,002 before dipping below the $2,000 mark. Over the past 30 days, gold has appreciated by more than 9% against the U.S. dollar, marking a 22% increase over the past 12 months. The report highlights central bank purchases as a significant driver of demand.

In addition, the council’s report reveals that gold demand in the third quarter exceeded its five-year average by 8% when excluding over-the-counter (OTC) transactions, despite a 6% year-over-year decrease, totaling 1,147 metric tons. When factoring in OTC and stock flows, overall demand increased by 6% from the previous year, reaching 1,267 metric tons.

Investment demand for gold in the third quarter stood at 157 metric tons, marking a 56% increase from the previous year, albeit falling short of the five-year average of 315 metric tons. Gold exchange-traded funds (ETFs) worldwide experienced a decrease of 139 metric tons in the third quarter, although less than the 244-ton outflow seen in the same quarter of the previous year.

Louise Street, senior markets analyst at the World Gold Council, summarized the findings, stating, “Gold demand has remained resilient this year, performing well despite challenges such as high interest rates and a strong U.S. dollar. Our report demonstrates healthy gold demand this quarter compared to its five-year average.”

Against the backdrop of escalating tensions in Israel since October 2023, the values of precious metals and bitcoin (BTC) have surged amid mounting economic uncertainty. Gold has appreciated by 9.4% over the last month, while BTC has surged by 25%. Despite Treasury yields retreating, U.S. stocks closed the week on a positive note, with all four primary indices ending Friday’s trading session in positive territory.

What are your thoughts on central bank gold demand in Q3 2023? Share your opinions in the comments section below.

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