Factors contributing to reduced gold demand in the first two quarters of this year had little impact on the third quarter, according to Gold Demand Trends, a monthly publication of the London-based World Gold Council.
Gold demand in the first half of 2002 was off 14% from year-earlier levels in terms of tonnage, but the slide was halved to 7% in the third quarter.
In dollar terms, demand was 6% higher than a year earlier, and the fall in the dollar value of buying physical gold, which started in 1997, appears to have halted.
Along with a weak world economy, the rise in the price of gold and the ebb and flow in the price of the yellow metal continued to deter jewelry buyers. However, during the third quarter, buyers started to get accustomed to prices above US$300 per oz. The year-over-year fall in jewelry demand in tonnage terms therefore slowed sharply to 4%, compared with 17% during the first half of the year. Meanwhile, the gold used in the third quarter was worth 10% more than it was a year earlier.
Industrial demand in the third quarter was 7% higher in tonnage terms (23% in dollar terms) than a year earlier. The recovery in several East Asian countries gained pace and outweighed the impact of slack demand in Europe. Dental demand was slightly higher than a year earlier but was worth 15% more.
Net retail investment tonnage was 32% lower than in the third quarter of 2001, but this was due to the exceptional level of gold buying in the immediate aftermath of Sept. 11, 2001.
Interest in gold as an investment for individuals continues to build, albeit slowly, in light of political and economic concerns; market reports and other evidence suggest that this is true also for institutional investment.
The pattern of a slowing fall in consumer demand (jewelry and retail investment) applied to several countries — most notably India, where the 8% year-over-year fall recorded in the third quarter compared with a 4% decline in the first half of the year. Most Middle Eastern countries followed this model, as did Brazil, Thailand and Taiwan. Demand was buoyant in Pakistan, up 32%, year-over-year, and up another 5% in Vietnam. Meanwhile jewelry demand in the U.S. rose 3% despite a significant overall drop in the luxury goods sector. There was, however, a pause in the recovery in Turkey after a strong first-half, and demand remained weak in Europe and Hong Kong and hesitant in countries such as China, Korea and Indonesia.
World gold demand (excluding institutional investment) was 780 tonnes in the third quarter, 7% lower than in the third quarter of 2001. This brought demand in the first three quarters to 32,332 tonnes, 12% lower than in the corresponding period of 2001.
The immediate causes of the fall in gold demand in tonnage terms during the first nine months of 2002 were the rising price and the weak world economy; an an additional factor was the reduction in mining company hedge books during the period. All contributed to the reduced levels of gold supply and demand.
In the third quarter, jewelry purchases accounted for 611 tonnes gold, the major part of overall demand. Eighty-three tonnes of the yellow metal were used in retail investment, 69 tonnes for industrial use, and 17 tonnes for dental purposes.
The total value of gold demand in the third quarter was US$7.9 billion, or 6% higher than a year earlier, despite the fact that 7% less gold was consumed. This reflects the increase in the dollar price, which averaged US$314 per oz. in the third quarter, compared with US$274 a year earlier.
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