The Strategist

Thomson Reuters: Gold surplus grows in Q3

11/22/2018 - 11:15

According to Thomson Reuters estimates, the surplus of gold in the world market increased significantly in the third quarter. The supply of the precious metal by 242 tons exceeds the potential demand against the background of a record reduction of investments from exchange-traded funds. Professional investors have lost interest in gold amid rising global interest rates and the stronger US dollar.

Thomson Reuters GFMS has published a study on world production and consumption of gold in the third quarter of 2018. According to analysts, the offer of the precious metal in the last quarter amounted to 1,163 tons, the maximum value from the third quarter of 2016. Compared with the same period in 2017, the figure increased by 24 tons. The main reason for the increase in metal supply was a sharp increase in the volume of its processing from scrap - from 297 to 311 tons. In turn, production increased by 10 tons, to 852 tons.

The growth of the supply of gold more than overlapped the stagnant demand. According to GFMS estimates, consumption of the precious metal during the reporting period amounted to 919 tons, which is 74 tons less than in the third quarter of 2017. As a result, the metal surplus on the world market reached 242 tons against 143 tons a year earlier.

The main reason for the sharp decline in world gold consumption was the reduced investment demand - by 68 tons, to 287 tons.

Consumption of the jewelry industry remained near the level of the third quarter of 2017 (632 tons).

The fall in investment demand was due to a sharp decline in interest in the metal on the part of exchange-traded funds (ETF), focused on investments in gold. At the end of the quarter, the assets of such funds decreased by 91 tons against a growth of 24 tons a year earlier.

The departure of professional investors was partially offset by increased demand for metal from private investors and central banks. GFMS estimates that individuals purchased 248 tons of metal in the third quarter, which is 27 tons higher than in the same period last year. Central banks increased purchases from 117 to 130 tons.