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Gold Prices Well Supported Despite Weak Physical Demand

Gold Prices Well Supported Despite Weak Physical Demand

Martin Essex, MSTA, Analyst

Talking Points

- Demand for gold fell in Q3 to an eight-year low but the market price barely moved after the figures.

- That suggests prices are firmly underpinned at current levels, helped by the weakness of the US Dollar.

What Does the Fourth Quarter Hold for Gold, Oil, Equities and Other Key Markets? Find out here

The price of gold continues to hold its ground despite data from the World Gold Council released Thursday showing that demand for the metal in the third quarter of the year fell to an eight-year low as exchange-traded fund inflows slowed sharply.

The price did ease back, but only after touching its highest level since October 20, helped by the current weakness of the US Dollar, which has been undermined by uncertainty about President Donald Trump’s tax-reform proposals. That points to fundamental support for gold despite the weak physical backdrop.

Chart: Gold Price, One-Hour Timeframe (October 18 – November 10, 2017)

Gold Prices Well Supported Despite Weak Physical Demand

Chart by IG

In its report on gold demand trends, the World Gold Council reported that the third quarter saw a 9% year/year drop in gold demand to 915 metric tons, with year-to-date demand down by 12%.Exchange-traded funds had another quarter of positive inflows but, at 18.9tonnes, they fell far short of the 144.3tonnes influx in the third quarter of last year. A softer quarter in the jewelry sector (-3%) accounted for 17tonnes of the year/year decline. Demand from other sectors firmed: central banks bought a healthy 111tonnes (+25% year/year) while bar and coin investment strengthened by 17% to 222.3tonnes, albeit from a low base.

Gold Prices Well Supported Despite Weak Physical Demand

--- Written by Martin Essex, Analyst and Editor

To contact Martin, email him at martin.essex@ig.com

Follow Martin on Twitter @MartinSEssex

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