In the third quarter of 2021 demand for gold fell 7% year-on-year and 13% quarter-on-quarter to 831t, primarily due to outflows from gold-backed exchange-traded funds (gold ETFs), according to the World Gold Council’s latest Gold Demand Trends report.

Net gold ETF sales were relatively small (27t), but when compared to the pandemic-induced buying surge of a year earlier, this was enough to place overall gold demand into a year-on-year decline, despite demand increasing in all other sectors.

Consumer purchases of gold jewellery increased 33% y-o-y to 443t. Meanwhile bars and coins – a category of physical gold products overwhelmingly bought by retail investors – saw a fifth consecutive quarter of year-on-year gains, with 262t purchased in Q3. Gold used in technology grew 9% y-o-y, and central banks added 69t to their reserves.

The gold price averaged US$1,790/oz throughout the quarter – down from Q3 2020’s all-time USD high, but above its 3yr, 5yr and 10yr averages.

Louise Street, Senior Markets Analyst at the World Gold Council, said: “The relatively modest outflows from gold ETFs have had a disproportionate effect on this year’s figures, outweighing positivity almost everywhere else across the board.

“The outflows themselves are part of a bigger picture. A year ago, investors were flocking to gold, seeking a hedge against the pandemic. And gold ETFs were particular beneficiaries of these flows, adding more than 1,000 tonnes over the first three quarters of 2020. So, while there has been selling by gold ETF investors this year, the outflows have been modest in comparison.

“The rest of the gold market is seeing positive news – not least the strong growth in jewellery and technology demand, especially pleasing because they are at least partially consequences of an overall global economic recovery. Likewise, central banks remain net buyers, and bar and coin investment is growing.

“Looking forward, we expect the full-year picture for gold demand to look very similar: strong consumer and central bank will mitigate losses from ETFs. Jewellery demand will continue to exceed last year’s levels, but investment demand in total will be weaker in 2021, despite healthy bar and coin demand.”

Key findings included in the latest Gold Demand Trends report for Q3 2021 include:

Overall demand (excluding OTC) declined in Q3 by 7% year-on-year and 13% quarter-on-quarter to 831t

ETFs observed modest outflows totalling -27t while overall holdings remained high (3,592t)

Bar and coin demand was at 262t, an increase of 18% y-o-y and 8% q-o-q.

US dollar gold price averaged US$1,789.5/oz, 6% lower than Q3’20 (which experienced record high prices) and 1% lower than the preceding quarter.

Global jewellery demand improved to 443t. increasing 33% year-on-year. China, India and the Middle East drove this growth, although Western markets also began to recover.

Central banks were net buyers of 69t, taking YTD purchases close to 400t and meaning eventual 2021 aggregate demand will likely be in the region of the five-year average. Brazil, Uzbekistan and India were key players in the market.

Demand in the technology sector recovered to pre-pandemic levels and was 9% higher y-o-y at 84t, and 4% higher q-on-q.

Total supply 3% lower y-o-y at 1,239t despite mine production rising to the highest quarter on record. The y-o-y drop was due to a sharp fall in recycling in response to lower gold prices.