Clyde Russell is a Reuters market analyst. The views expressed are his own.
LAUNCESTON, Australia, Nov 19 (Reuters) – The most frightening concept for a gold miner or trader currently would be to contemplate a world without China.
Global gold demand fell to the lowest in four years in the third quarter, according to the World Gold Council, and the 21 percent drop from the same quarter in 2012 would have been far worse if it wasn’t for China. China is set to overtake India as the top gold consumer this year, and is already ahead on a rolling four-quarter basis.
Demand in China rose to 209.6 tonnes in the third quarter, up from 177 tonnes in the same quarter last year, largely driven by a 29 percent jump in jewellery demand.
In contrast, India’s consumption slumped 32 percent to 148.2 tonnes in the third quarter from the same period in 2012, as the government’s efforts to restrict imports became more effective.
The other drivers of gold demand also don’t look encouraging for bulls, with investment demand down 56 percent and central bank purchases slipping 17 percent in the third quarter from a year earlier.
The best that can be said is that outflows from exchange- traded funds were nowhere near as dramatic as those in the second quarter, with the council reporting net sales of 118.7 tonnes in the third quarter, down from 402.2 tonnes in the second.
Central bank net purchases were 93.4 tonnes in the third quarter, up from 79.3 in the second. However, central bank buying is likely to be well below the levels of the prior two years.
Assuming fourth-quarter buying matches the average so far in 2013, the total for the year will be around 400 tonnes, down from the 457 tonnes for 2011 and the 544 tonnes for 2012.
The overall message from the council report is that China is really the sole bright spot for gold demand, and likely the best reason why prices have been largely stable after plunging almost 30 percent in the first half of the year to a three-year low of $1,180.71 an ounce on June 28.
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