OTC gold investment offsets drop in China jewelry, Germany bar and coin...
UNREPORTED gold buying has again saved the global gold market from a heavy surplus of supply over demand according to new data today, driving prices to fresh record highs even as central banks slow their purchases as a group.
Figures released by the mining industry's World Gold Council say that across the past 12 months, visible gold demand – net of scrap supply and recycling flows – matched only 68.5% of new mine output.
The gap between demand and supply was again closed by
undisclosed central-bank gold buying on the WGC estimates, plus 'over-the-counter' and other unreported demand among private-sector investors.
"Global gold ETF inflows were a major driver of growth" between July and September says the new
Gold Demand Trends data and analysis from the WGC, with investment through those highly visible stock-market traded products flipping positive for the first time since Q1 2022.
But running much larger than ETFs or central-bank demand, 'OTC and other' unreported purchases "almost doubled" in the third quarter of 2024 from the same period last year says the Council's new report, pointing to wholesale and kilo-bar transactions struck with large bullion banks, dealers and brokers rather than via exchange-traded contracts or retail purchases of smaller, higher-cost bars or coin.
That marked "the seventh consecutive quarter in which OTC investment has been positive" – a number which "captures demand in the OTC market (for which data is not readily available)," according to the WGC's own definition, plus "changes to inventories on commodity exchanges, any unobserved changes in fabrication inventories, and any statistical residual.
All told, that has led to an overall drop of 11.1% in fabricated product demand by weight in the first 9 months of 2024 on today's WGC figures, compiled from fieldwork, analysis and intelligence gathered by specialist analysts Metals Focus.
Central banks as a group meanwhile halved their net demand in July-to-September on Metals Focus' estimates for the WGC compared to Q3 last year, dropping to the lowest quarterly buying since spring 2023. But while
official gold holdings data from the International Monetary Fund aren't yet available for July-to-September, the WGC numbers outstripped those reported figures by 110% over the prior 5-year period.
Over that same half-decade, 'OTC and other' has now accounted for 1 ounce in every 5 of private-sector net gold demand on the WGC's Gold Demand Trends data, twice the proportion of the previous 20 calendar quarters.
In Q3 this year "The value of demand jumped 35% year-on-year to exceed US$100bn for the first time ever," says the World Gold Council, judging total purchases to equal exactly the sum of mining output with scrap supply.
But visible net demand also set a new quarterly record on BullionVault's analysis of the WGC figures, rising 41.6% from the third quarter of 2023 to reach above $62 billion.
"The over-the-counter market has been increasingly influenced by demand from high-net-worth investors," says
Gold Demand Trends Q3 2024, with those players both seeming "to suffer a case of FOMO as gold's performance repeatedly hit the headlines [while] seeking to hedge geopolitical risk and economic risks.
"Positioning of speculative investors in the US futures market can [also] be used as a proxy for identifying trends" in this unreported and undisclosed segment of gold demand, says the WGC – and
the net spec long in Comex gold derivatives leapt to a new record Dollar value in September.
