Gold Demand Slumps in Third Quarter as Chinese Economy Slows

Global demand for gold fell in the third quarter as buyers in China remained cautious on the domestic economic slowdown, although interest in the metal picked up in India ahead of the festival season.

According to a report from the World Gold Council, demand for the yellow metal was 1,084.6 tonnes in the third quarter, down 11 percent from the same period in the previous year. In terms of value, gold demand was down 14 percent year-on-year.

Demand for gold in China, one of the top markets for the metal, fell eight percent year-on-year in the third quarter as the negative sentiments surrounding the world's second largest economy impacted purchases.

"This was particularly noticeable among the middle class whose purchases of 18-carat gold jewellery were among the worst casualties," the report said.

"In contrast, the decline in demand for 24-carat was relatively modest, allowing pure gold jewellery to gain market share."

Central bank purchases too have eased.

Interest in the metal was lower in Europe as well. Purchases of gold bars and coins from two of the major European gold-buyers, Germany and Switzerland are reported to have dropped by half.

"It was weaker than I would've thought, and you did take a step back," Bill O'Neill, principal with broker-trader Logic Advisors, told the Wall Street Journal, adding that if the low sentiments continue in the fourth quarter, it could be a cause for concern.

On the positive side, demand in India is showing signs of recovery, up 9 percent from the same quarter in the previous year as retailers restocked goods ahead of the Diwali festival and wedding season in the country, the council added.

Global investments in Exchange Traded Funds (ETF) too were significantly higher, up 56 percent on the previous year.

However, the Wall Street Journal reported that the demand for gold in India failed to meet expectations during this year's festival season, which usually sees a surge in interest for the yellow metal. Prithviraj Kothari, director of RidhiSidhi Bullion, told the WSJ that gold sales remained around 70 tonnes this year, below the 100 tonnes recorded in the previous year.