Covid-19 Impact | Central Banks Sell Gold For First Time In Decade: World Gold Council

The global gold demand dropped by 19% year-on-year (y-o-y) as consumers continued to feel the impact of the Covid-19 pandemic, making it the lowest quarterly total since Q3 2009.

Central banks became gold sellers for the first time in a decade as some producing nations exploited near-record prices to soften the Covid-19 pandemic blow.  Central banks generated modest net sales of 12 tons of Gold in Q3, making it the first quarter of net sales since Q4 2010, primarily due to concentrated sales by two banks. Buying continues at a moderate pace, driven by the need for diversification and protection amid the negative rate environment, said World Gold Council (WGC) in its latest report.



According to the report, the selling was driven by Uzbekistan and Turkey, while Russia’s central bank posted its first quarterly sale in 13 years.  “The impact of Covid-19 is still being felt in the gold market across the world. The combination of continued social restrictions in many markets, the economic impact of lockdowns, and all-time high gold prices in many currencies proved too much for many jewellery buyers. We believe that this trend will likely continue for the foreseeable future,” said Louise Street, Market Intelligence at the WGC.

“However, looking to the investor landscape, we saw further record inflows into gold-backed ETFs in Q3, taking the global total to a record high. It was equally encouraging to see Gold’s role as a safe-haven for retail investors shine through this quarter as people continue to seek stability in volatile markets.”

In September, Citigroup Inc. predicted that central bank demand would rebound in 2021, after slowing this year from near-record purchases in both 2018 and 2019. The reported gross sales jumped to 78.9 tons in Q3, with the rise mainly attributable to two central banks, Turkey and Uzbekistan. The central banks of Turkey and Uzbekistan sold 22.3 tons and 34.9 tons of Gold, respectively, in the third quarter, the WGC said. Overall, central banks remain net purchasers on a year-to-date basis, with Demand for the first three quarters totalling 220.6 tons, and the WGC expects the central banks to remain net buyers in 2020, albeit at a slower pace than in the previous two years.

Global Demand For Gold
The global gold demand dropped by 19% year-on-year (y-o-y) to 892 tons in Q3, as consumers continued to feel the impact of the Covid-19 pandemic, making it the lowest quarterly total since Q3 2009.

Indian Demand For Gold
Indian jewellery demand staged a modest recovery from its Q2 record low but remained well below 2019 levels. Demand was 48% lower y-o-y at just 52.8 tons – the third-lowest quarter for Indian jewellery demand. Indian consumers, too, have to cope with frequent lockdowns and unprecedented gold prices, but the inauspicious periods of Pitru-Paksha and Adhik Maas discouraged buying during September (both periods are considered by Hindus to be inauspicious for gold purchases).
As the local gold price breached Rs50,000/10gm – a significant milestone for India – casual/impulsive purchases were curtailed in favour of needs-based buying. The prohibitive price level also encouraged a shift to lighter-weight plain gold pieces, said WGC.

Here are findings of the WGC Gold Demand Trends report for Q3 2020

Overall Demand declined in Q3 by 19% year-on-year to 892t
· ETF inflows investors globally added 272.5t to their holdings, taking global holdings to a new record of 3,880t
· Bar and coin demand increased significantly by 49% year-on-year to 222.1t
· Global jewellery demand improved from a record low in Q2 but declined by 29% year-on-year to 333t
· Central banks were net sellers of 12t the first quarter of net sales since 2010
· Demand in the technology sector fell by 6% year-on-year to 76.7t
· Total supply declined 3% year-on-year.