Sagging gold prices have not been enough to lure buyers back into the bullion market, with global demand continuing to fall in the third quarter, according to the World Gold Council.
Demand for gold slipped 2 percent on year to 929 tons in the July to September period, the WGC's latest Gold Demand Trends report showed, the lowest level since the fourth quarter of 2009. This compares with 964 tons in the April to June quarter, which marked a 16 percent on year decline.
"Q3 was a subdued quarter for the gold market…the lack of a clear price signal caused investors to hold back from buying gold," WGG, an industry body, wrote in the report published on Thursday.
Spot gold stood at $1,325 at the start of the third quarter, but fell almost 9 percent over the three-month period to end at $1,208. It last traded at $1,160.
Appetite for gold has been lackluster in recent months, as the up trend in global equities detracts interest from the precious metal.
On the consumer front, global jewellery demand softened 4 percent on year to 534 tons as Chinese consumers held off buying. Jewellery remains the biggest component of gold demand, representing more than half of all demand.
Mainland jewelry demand fell 39 percent to 147 tons as "the jewellery market caught its breath after an exceptional year for demand last year," WGC said.
However, India was a bright spot, with demand there jumping 60 percent on year to 183 tons in the quarter.
The large rise partly reflects weakness in the same period last year, when the government introduced import curbs and raised import duties, WGC said. But it also demonstrates improved consumer confidence under the new government led by Prime Minister Narendra Modi and strong levels of buying in the lead up to the festival season, it said.
Investment demand stabilizes
After sharp selling in the third quarter of 2013, investment demand – which includes bars and coins and exchange traded funds (ETFs) - rose 6 percent in the three months to September, to 204 tons.
ETF outflows slowed to 41 tons in the quarter, compared with 120 tons in the same period last year.
"This lends weight to our analysis that more tactical investors have largely exited and the remaining base of ETF positions are held as strategic investments," WGC said. "There was, however, little during the quarter to encourage fresh investment in ETFs."
Buying by central banks, meanwhile, stood at 93 tons – 9 percent lower than the year-ago period. However, it was the 15th consecutive quarter of net buying.
"With many economic and geopolitical wounds still open, central banks once again sought the protection and diversification of gold," WGC said.
Supply dips
Total supply fell by 7 percent on year to 1,048 tons as the volume of recycled gold flowing into the market continued to shrink.
Recycled gold is sourced from old fabricated products which have been recovered and refined back into bars.
"The contraction was global: a feature of both developing and industrial markets. This was partly a consequence of gold prices being relatively low and stable, and partly due to ready supplies of old gold being exhausted," WGC said.
