The latest report from the World Gold Council reveals that demand in the gold market continues to dominate, especially with central banks' purchasing speeds reaching new highs since last year. Although the record for the third quarter of 2022 was not broken, the demand so far this year has reached 800 tons, and it is expected that central banks will continue to increase purchases before the end of the year, further consolidating demand in 2023.
The demand from the central bank became the main driving force for physical gold demand in the previous quarter. Although the overall demand slightly decreased, from a long-term perspective, the demand increased by 8% compared to the five-year average level. In addition, the gold market continues to be supported by strong demand from the over-the-counter trading market, although this demand is difficult to accurately measure, it is expected to grow by 6% year-on-year.
Although investment demand may rebound in the first three months of 2023, the greedy demand from central banks for gold will still be the main driving force in the market. Central banks across the world have exceeded expectations in their purchasing power, potentially setting a new record for annual total purchases. Analysts believe that this reflects the market's cautious allocation strategy towards gold.
Juan Carlos Attigas, Global Research Director of the World Gold Council, pointed out that central bank demand highlights the diversified role of gold in investment portfolios, especially in the face of geopolitical instability and financial market volatility, where the role of gold is crucial. Central banks around the world not only purchase gold tactically, but also see it as a strategic measure.
Looking ahead, analysts from the World Gold Council predict that as gold prices remain around $2000 in the fourth quarter, ETF demand will rebound, and potential support for gold still exists, supported by escalating geopolitical tensions and COMEX futures sentiment. However, jewelry demand may be weak for the rest of this year, influenced by various factors. Although the market outlook is still uncertain, gold continues to play its important asset diversification and hedging role.
The People's Bank of China has been leading the wave of gold purchases, far surpassing other countries. This trend is an attempt by countries around the world to keep their foreign exchange reserves away from a portion of the US dollar, while also being a part of some countries attempting to de dollarize their trade relations by using their own currencies for trade.
According to data from the World Gold Council, central banks have purchased 800 tons of gold so far this year, a year-on-year increase of 14%. The People's Bank of China has individually purchased 181 tons of gold, making it a major contributor. The total amount of gold reserves held by the People's Bank of China has reached 2192 tons.
The gold boom in China is partly driven by domestic economic instability, including the depreciation of the renminbi, fluctuations in the real estate industry, and the stock market. The rise in global inflation has also stimulated demand for gold, especially in the context of currency depreciation, where gold is seen as a safe haven asset that helps maintain its value.
The conflict in the Middle East and the escalation of global geopolitical tensions have pushed up gold prices, which has once again attracted the attention of investors. The spot gold price once exceeded $2000 per ounce, reaching its highest level since mid May. Although jewelry demand decreased in the third quarter of 2022, it remained relatively healthy, especially when the market is facing various economic pressures and uncertainties.
Recently, conflicts in the Middle East have led to a 10% increase in gold prices. Gold continues to serve as a safe haven asset, providing investors with protection during uncertain times. The geopolitical uncertainty related to global currency and market fluctuations has also increased demand for gold, which may support the future performance of the gold market.
