Central Banks Become Net Sellers Of Gold For First Time In A Decade

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  • Gold demand falls by 30% year on year.
  • Jewellery fabrication remained the worst-impacted sector, dragged lower by the economic impacts of the COVID-19 pandemic and record gold prices.
  • Gold recorded a spectacular performance during the second quarter, soaring to an all-time high of $2,067/oz in early August.
  • Gold ETPs recorded the third consecutive quarter of inflows, albeit at a slower pace in the third quarter, with year-to-date inflows far exceeding the record annual gain seen in 2009.

Central banks shifted to being net sellers for the first time in nearly a decade, with net sales estimated at just under thirteen tonnes for the third quarter according to a Refinitiv research.

The shift was driven by an absence of purchases from Russia and China, as well as a significant rise in gross sales as countries continued the battle against COVID-19, which has taken a severe toll on the global economy, with perhaps some also taking advantage of gold's astonishing price performance in recent months.

Gold recorded a spectacular performance during the third quarter, soaring to an all-time high of $2,067/oz in early August, driven by escalating fears over the global economic downturn caused by the COVID-19 pandemic and massive stimulus measures introduced by central banks around the globe in an attempt to lessen the impact. Gold averaged $1,909/oz in the third quarter, up by 27% from the previous three months and 30% above the level seen over the same period of last year.

Physical gold demand fell by 30% year on year, to 562 tonnes in Q3, as record-high gold prices continued to take its toll on consumption. Jewellery fabrication remained the worst-affected segment, with global offtake contracting by 23% to a total of 314 tonnes. Despite many markets re-emerging from severe lockdown restrictions prevalent for most of Q2, demand remained poor across all the key regions. Countries continued to battle against the COVID-19 pandemic, which took a serious toll on the global economy, unemployment rates, household incomes and consumer demand. Jewellery offtake in the world's two largest gold consuming markets, China and India, dropped by 7% and 21%, respectively, battered by weak economic conditions, along with a record-high gold price. It is worth adding, however, that the rate of decline was less pronounced than the one seen in the previous two quarters as economies started to re-open after the lockdown.

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