Gold Demand Fell 21% Last Quarter as Investors Sold ETP Holdings

Gold demand fell 21 percent in the third quarter as investors continued to dump holdings of the metal through exchange-traded funds and central banks slowed purchases, the World Gold Council said.

Global demand slipped to 868.5 metric tons, from 1,101.4 tons a year earlier, the London-based industry group said today in a report. Investors pulled 118.7 tons out of ETFs and similar products, while buying from central banks fell 17 percent, the council said.

Gold prices in New York tumbled 24 percent this year, entering a bear market in April, as some investors lost faith in the metal as a store of value amid an equity rally and low inflation. This month, holdings in global ETPs fell to the lowest since 2010, and the value of the assets in 2013 plunged by about $64 billion, data compiled by Bloomberg show.

“Investors have lightened their holdings in gold, and we saw a flight to more riskier assets like equities,” Marcus Grubb, the managing director of investment at the council, said yesterday in a telephone interview from London. “ETF selling and the damage done by India’s drop in purchases also hurt gold, though we saw strong buying in other parts of Asia.”

Consumer demand in India fell to 148.2 tons from 219.1 tons a year earlier, while Chinese consumption increased to 209.6 tons from 177 tons, the council said. India’s buying slumped amid increasing import restrictions, Grubb said.

India, China

In the first three quarters, consumer demand in India totaled 715.7 tons, trailing China’s purchases of 797.8 tons, Grubb said.

Gold futures for December delivery fell 0.2 percent to $1,268.40 an ounce yesterday on the Comex in New York. In the third quarter, prices climbed 8.4 percent, the first gain in a year, amid increased buying from consumers of bars and coins.

Central banks added 93.4 tons to reserves in the three months through September, compared with 112.3 tons a year earlier, the council said.

“The volatility in prices and the weakness in the emerging markets has slowed their purchases,” Grubb said. “This quarter, we may see higher buying.” This year’s purchases by central banks “may be more than the estimated 350 tons,” he said.

Mine output increased 3.7 percent to 772.3 tons in the third quarter from a year earlier, the council said. Scrap supply was down 11 percent to 385.2 tons, the sixth straight drop.

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