According to the World Gold Council’s latest Gold Demand Trends report the global gold demand dropped by 19 per cent year-on-year to 892 tonnes in third quarter of 2020, as consumers continued to feel the impact of the COVID-19 pandemic.

According the WGC report this was the lowest quarterly total since Q3 2009. The Year-to-date demand of 2,972.1 tonnes was 10 per cent lower versus the same period in 2019.

While overall demand declined, Q3 saw significant growth in investment demand which rose by 21 per cent y-o-y. Investors globally bought 222.1 tonnes of gold bars and coins and an additional 272.5t through gold-backed Exchange Traded Funds, ETFs. Year-to-date, gold ETFs have increased their holdings by a record 1,003.3t.

However, the combination of continued social distancing restrictions in many markets, the economic slowdown, and a record high gold price in many currencies proved too much for many jewellery buyers. Demand declined by 29 per cent y-o-y at 333t, down from an already relatively anaemic Q3 2019.

Quarterly inflows of 272.5t took global holdings of gold-backed ETFs to a new record of 3,880t. While the pace slowed a little from H1, sustained inflows throughout Q3 demonstrate the continued motivation of ETF investors to add to their holdings.

The US dollar gold price rose to a record high of US$2,067.15/oz in early August. This was followed by a pullback with the price closing the quarter around US$1,900/oz. Record high prices were also seen in various other currencies, among them the rupee, the yuan, the euro, and sterling.

Bar and coin investment jumped to 222.1 tonnes in Q3 - up 49 per cent y-o-y. Most major retail investment markets saw strong growth. The largest volume increases were seen in western markets, China and Turkey, in contrast with continued significant sales in Thailand.

The effects of the pandemic further impacted the jewellery sector. The weakness caused by COVID-19 was compounded by record gold prices: Q3 demand fell 29 per cent y-o-y to 333 tonnes. While China and India accounted for the largest volume declines, weakness was global.

Central banks generated modest net sales of 12t of gold in Q3. This was the first quarter of net sales since Q4 2010, primarily due to concentrated sales by two banks. Buying continues at a moderate pace, driven by the need for diversification and protection amid the negative rate environment.

Louise Street, Market Intelligence at the World Gold Council, commented: “The impact of COVID-19 is still being felt in the gold market across the world. The combination of continued social restrictions in many markets, the economic impact of lockdowns, and all-time high gold prices in many currencies proved too much for many jewellery buyers. We believe that this trend will likely continue for the foreseeable future.

“However, looking to the investor landscape we saw further record inflows into gold-backed ETFs in Q3, taking the global total to a record high. It was equally encouraging to see gold’s role as a safe-haven for retail investors shine through this quarter, as people continue to seek stability in volatile markets,” he said.

Meanwhile, gold prices rose on Friday following two straight sessions of sharp declines as a rally in the dollar stalled, prompting some investors to seek refuge in bullion after rising COVID-19 cases and the upcoming U.S. elections kept markets on edge. Spot gold rose 0.4% to $1,875.14 after shedding as much as 1% on Thursday. US gold futures rose 0.4% to $1,875.50.

“There’s good buying from investors who may have missed buying gold the first or second time, but also thinking there are some very good long-term structural positives to gold - rising inflation, weakening dollar,” said Robin Bhar, an independent analyst. “Investors are attuned to the fact that gold should be in a portfolio going forward, and that’s why we’re seeing some good downside support.”

Fresh coronavirus-led lockdowns in Europe and surging cases in the US weighed on equity markets. Commerzbank analyst Eugen Weinberg said the higher liquidity offered by the European Central Bank, which has committed to take new action in December to ease the economic blow, also supported gold. The dollar edged lower, making bullion a more attractive bet for those holding other currencies. But gold was still on track for a third straight monthly decline, pressured by a lack of progress on a new US fiscal package, given bullion’s status as an inflation hedge. Investor focus is now on the Nov. 3 US presidential election, with early polls showing Democratic contender Joe Biden with an edge nationally, but with a tighter lead in battleground states.