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Gold demand firmer in Q3

Healthy Q3, driven by stronger consumer and central bank buying, helped year-to-date demand recover to pre-COVID norms.

Gold demand (excluding OTC) in Q3 was 28% higher y-o-y at 1,181t. Year-to-date (y-t-d) demand increased 18% vs the same period in 2021, returning to pre-pandemic levels.

Jewellery consumption reached a robust 523t, increasing 10% y-o-y despite the deteriorating global economic backdrop. Y-t-d demand is slightly firmer (+2%) at 1,454t.

Investment demand (excluding OTC) for Q3 was 47% lower y-o-y at 124t, reflecting weak sentiment among some investor segments. 36% growth in bar and coin investment (to 351t) was insufficient to offset 227t of ETF outflows. OTC demand contracted significantly during the quarter, echoing weak investor sentiment in ETFs and futures markets.

Central banks continued to accumulate gold, with purchases estimated at a quarterly record of nearly 400t.

An 8% y-o-y fall in technology demand reflected a fall in consumer demand for electronics due to the global economic downturn.

Total gold supply increased marginally (+1% y-o-y) to 1,215t. A sixth consecutive quarter of y-o-y growth in mine production was partly offset by lower levels of recycling.

Highlights

The LBMA gold price PM (US$/oz) fell by 8% during the third quarter. The decline was largely a response to US dollar strength as the Fed hiked interest rates to combat high inflation. However, the average gold price in Q3 was only 3% lower y-o-y, more closely aligning with the relative performance of demand (OTC inclusive) and supply during the quarter.

Investment demand diverged on differing priorities. Retail investors bought gold as a store of value amid surging global inflation, while ETF investors reduced their holdings in the face of rising global interest rates.

India generated much of the global recovery in jewelry. Urban consumers were the engine of Indian demand in Q3, encouraged by a return to pre-COVID levels of economic activity. Rural consumers were more cautious as their inflation outpaced that of their urban counterparts.

Chinese retail demand firmed as lockdown restrictions eased. Jewelry consumers benefited from a pullback in the gold price as lockdown restrictions eased in key cities. And retail investors were encouraged by gold’s safe-haven appeal amid a depreciating local currency and falling local equity prices.

Gold market sees solid start to 2022

Q1 gold demand was 34% above Q1 2021, driven by strong ETF inflows

In a quarter that saw the US dollar gold price rise by 8%, gold demand (excluding OTC) increased 34% y-o-y to 1,234t – the highest since Q4 2018 and 19% above the five-year average of 1,039t. The Ukraine invasion and surging inflation were key factors driving both the gold price and demand. Gold ETFs had their strongest quarterly inflows since Q3 2020, fuelled by safe-haven demand. Holdings jumped by 269t, more than reversing the 174t annual net outflow from 2021. Bar and coin investment was 282t in Q1, 20% lower than the very strong Q1’21 but 11% above its five-year quarterly average. Renewed lockdowns in China and historically high local prices in Turkey were key contributors to the y-o-y decline. Jewellery consumption lost momentum in Q1: demand was down 7% y-o-y at 474t. The drop was largely due to softer demand in China and India.Central banks added 84t to global official gold reserves during the first quarter. Net buying more than doubled from the previous quarter but fell 29% short of Q1'21.The technology sector had a steady start to the year: demand of 82t was the highest for a first quarter since 2018, driven by a modest uptick in gold used in electronics.

Q1 gold demand increased y-o-y as strong ETF flows offset weaker jewellery and retail investment

Global quarterly demand by sector*

Sources: Metals Focus, World Gold Council; Disclaimer*Data to 31 March 2022

Highlights

The LBMA Gold Price PM gained 8% in Q1, its best quarterly performance since Q2 2020. The average quarterly price of US$1,877.2/oz was around 5% higher than in the first quarter of last year.Gold mine production was 3% higher y-o-y at 856t. China resumed near-full production following safety-related closures, while higher grade ores were mined at various existing sites. The supply of recycled gold jumped to 310t (+15% y-o-y). This was the strongest first quarter for gold recycling activity for six years.After a strong start to Q1 in China, demand came to a virtual halt in March. Tough new lockdowns imposed to contain a resurgence of COVID-19 had a marked impact on demand for jewellery, bars and coins.

Silver remains a slow moving, frustrating long position for metals bulls who have remained steadfast over the past two years while watching base metals, energy, ags, and virtually all other commodities explode in price over the past 18 months. Since the price peak in August of 2020, Silver is down almost 20% while the DBC commodity tracking ETF is up 170%. Let’s take a look at the tape. Silver has been flirting will long term support at 21.80 (tested 6 times since the breakout in 2020), and falling resistance from the 2011 high (which it has also tested six times). Within this long, two year price consolidation between long term support and long term resistance, action can be further broken down into response and activity around the 200 day moving average, where price found support in the spring and summer of 2021, broke in July and retested (and rejected) three times throughout the winter until finally breaking through in February. Last week’s sell-off pushed price right to the 200 DMA, where it found support and bounced hard.

Price is now forming a bull wedge, and a breakout of the wedge would likely precipitate a run to falling resistance in the $27 zone. With RSI sitting in the 40s, there is some potential energy in the system for a near term move.

Zooming out, silver looks good structurally. Price consolidation at long term support at 21.80 is clearly visible and forming a two-year ascending triangle. Big picture, the measured move on a breakout above $30 would create a price target right at $49 (at or around prior all-time highs). I view $30 as a key level, because it was the prior high in January 2021. A clean break above that level becomes very bullish.

Conversely, a breakdown below support at 21.80 would be bearish and likely precipitate a price waterfall back into the low teens.

CANYON, Texas, June 8, 2021 /PRNewswire/ -- GoldStar Trust Company, one of America's largest custodians of self-directed IRAs specializing in precious metals, announces the addition of Texas Precious Metals Depository ("TPMD") as a secure storage location for customers. In conjunction with GoldStar's custodial services, TPMD will complement the retail services provided by Texas Precious Metals to provide turnkey solutions for precious metals IRA investors.

Per the Internal Revenue Code, retirement investors may incorporate physical bullion and coins meeting specific criteria into their portfolios while retaining the applicable tax benefits of their accounts. Any precious metals held in such accounts must be stored in a depository or other qualified third-party storage facility.

"We are excited to meet the growing needs of GoldStar Trust's precious metal investors by providing them with a secure storage option right here in Texas," said Jeff Kelley, president of GoldStar Trust Company. "Tarek and his team have been great partners for many years, and Texas Precious Metals was the clear choice."

"Having worked with GoldStar Trust for more than a decade, we believe them to be the premier IRA custodian in the United States. We are thrilled for the opportunity to expand our partnership and provide a Texas-based storage option for GoldStar clients," said Tarek Saab, President of Texas Precious Metals and TPMD.

Texas Precious Metals Depository is a private underground bullion depository. The facility is entombed in concrete with multiple layers of protection, bulletproof doors, biometric access, armed security and 24/7/365 interior and exterior surveillance. TPMD is insured by underwriters at Lloyd's of London and monitored by county and city law enforcement.

About GoldStar Trust Company GoldStar Trust began serving customers in 1989 and is the leader in providing specialized services as a self-directed IRA custodian, trustee and escrow/paying agent. With over $2.5 billion in assets, GoldStar Trust is custodian for more than 37,000 self-directed IRAs and offers unique retirement solutions that allow investors across the nation to diversify their IRA portfolios with alternative investments to traditional stocks, bonds and mutual funds. GoldStar Trust is the trust branch of Happy State Bank.

About Texas Precious Metals Depository TPMD has been used as the main storage and logistics center for Texas Precious Metals since 2012, processing nearly $1 billion in precious metals transactions during that time while servicing private, commercial and institutional clients. Texas Precious Metals and TPMD are subsidiaries of Kaspar Companies, a fifth-generation Texas business founded in 1898.

SOURCE GoldStar Trust Company