Third-quarter global gold demand dropped 13% quarter-on-quarter, primarily due to the pandemic and outflows from gold exchange-traded funds (ETFs), according to the World Gold Council (WGC).
Gold traders expect future prices to move in the same direction as US inflation. If the inflation rate continues to rise, the price of gold will likely follow suit.
The WGC said global gold demand in the third quarter of this year dropped to its lowest level since the last quarter of 2020 due to selling by big players such as gold ETFs, while gold demand from jewellers, central banks, small companies and retail investors was still strong.
According to the council, overall gold demand from July through to the end of September stood at 831 tonnes, down 13% from 894.4 tonnes in the same period last year and from 1,084.9 tonnes in the third quarter of 2019.
The decline is mainly attributed to the impact of the Covid-19 pandemic, the council said.
WGC said central banks worldwide have temporarily stopped buying gold after the spread of Covid-19 forced many businesses to close, causing the employment rate, purchasing power, and jewellery sales, especially in Asia, to plunge.
However, at the same time the global economic downturn has also driven a lot of investors, especially in the US and Europe, to hoard gold as they viewed the precious metal as a safe-haven asset.
In addition, after the global economy showed signs of recovery, central banks' demand for the precious metal also increased while retail investors were able to buy at a faster rate than before the pandemic.
But big players are still hesitant, causing overall demand to drop.
ETFs that held gold over the past year also saw a massive sell-off due to recovering economic growth and rising interest rates that make non-yielding gold less attractive.
The WGC said that gold demand from jewellers stood at 1,700-1,800 tonnes in 2021, compared to 1,401 tonnes in 2020 and 2,123 tonnes in 2019, and it would be no surprise if central banks bought more than 450 tonnes this year, up from 255 tonnes in 2020.
Meanwhile, analysts said the gold market may recover slightly towards the end of the year thanks to increasing demand from investors in India during the wedding season and the New Year Festival.
MTS Gold Group's chief executive Nattapong Hirunyasiri said gold prices will continue to fall after the Federal Reserve tapers its quantitative easing (QE), which is expected to begin later this year.
He expects the global gold price to be in the range of US$1,780-1,820 an ounce by the end of the year while the domestic gold price will move in the range of 26,500-27,000 baht per one baht of gold weight.
