Worldwide demand for gold rose 6.2 tons year-over-year in Q3, led by robust central bank buying of 148.4 tons, the highest level of quarterly new purchases since 2015, reports the World Gold Council. Bar and coin demand by individual investors climbed 298 tons.
However, outflows from gold ETFs dampened overall purchases as gold-back ETFs shed 103.2 tons, which was the first quarter of ETF outflows since Q4 2016.
Speculators in gold-backed ETFs are interested only in gold’s price action, not in owning gold. Rarely do they take delivery of the underlying gold that backs up the ETFs.
As is typically the case, bar and coin investors increased purchases on gold’s price dips, caused by some big swings in stock markets worldwide. China – the world’s largest bar and coin market – saw demand rise 25% y-o-y. So far this year, China’s stock market is down 30% as China’s economy has slowed. Further, the trade war developing between China and the United States should add to China’s economic woes.
Iran, also in the Trump administration’s crosshairs, saw demand for bars and coins hit a five-and-a-half year high.
Demand for gold in jewelry and technological applications also rose, but the real reason for owning gold (and silver) lies in the our fedgov’s profligate handling of its financial affairs.
Although fedgov ran an official deficit of about $800 billion in the fiscal year just ended, the national debt increased right at $1,000 billion ($1 trillion). How’s that? Because many of fedgov’s programs are “off balance sheet,” such as the Post Office, disaster relief and Government Sponsored Entities (GSEs). They remain fedgov financial obligations, and Washington gets to pretend that the deficit is smaller.