The World Gold Council (WGC) released its "Global Gold Demand Trends Report" for the third quarter of 2023 on Tuesday. The report shows that as market turmoil and geopolitical uncertainty drive demand for gold, global central banks maintain a strong buying trend, providing support for gold demand.
Data shows that in the third quarter, global central banks net purchased 337 tons of gold, lower than the record low of 458.8 tons in the same period last year. However, since the beginning of 2023, the net purchase volume of central bank gold has reached 800 tons, setting the latest record since the association had this data.
Spot gold hit a high of $2009.29 per ounce on Monday, breaking the critical psychological threshold of $2000 for the first time since mid May as investors aggressively bought gold in search of safety after the Israeli-Palestinian conflict.
Investors believe that as the war continues, countries such as Iran, Syria, and Lebanon are at risk of being involved, and the cloud of war will envelop the entire Middle East region. If this situation occurs, it is expected that gold prices will further rise in the future.
Louis Street, senior market analyst at the World Gold Council, said: "With increasing geopolitical tensions and expectations of continued strong central bank buying, gold demand may unexpectedly rise
In addition to the central bank's purchase of gold, the investment demand for gold is still relatively limited, reaching 156.9 tons in the third quarter, a year-on-year increase of 56%, but far below the five-year average of 315 tons.
The World Gold Council believes that central banks are expected to continue to maintain strong demand for gold purchases for the remainder of this year. In addition, the demand for gold in the third quarter (excluding over-the-counter trading) was 1147 tons, 8% higher than the five-year average.
John Reade, Chief Market Strategist at the World Gold Council, said: "The strong demand from the central bank confirms our view that last year's growth was not a one-time event." He expects gold demand this year to reach or exceed last year's levels.
Read added that geopolitical uncertainty has always been the main driving force for central bank gold demand, and the current war in Gaza has further added upward pressure.
Due to a decrease in demand from European countries, the demand for gold bars and coins in the third quarter was 296.2 tons, a year-on-year decrease of 14%. However, the demand so far this year is still at the same level as in 2022, which is the largest demand year in nearly a decade.
The demand for gold by ETFs remained negative in the third quarter, with a net outflow of 139.3 tons of gold from ETFs during the quarter. The World Gold Council believes that this is because investors expect interest rates to remain high, and the Federal Reserve will not cut rates soon. The strong US dollar has led to outflows from gold ETFs. Another speculation is that gold buyers hope to hold physical gold, rather than some "position data".