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Better Prospects for Gold on the Horizon – GFMS

By Editing NAI
10/30/2015 9:18 a.m.


The GFMS Gold Survey, first published in 1967, is the world’s most authoritative source of independent supply and demand data for the gold industry. Today Thomson Reuters publishes the GFMS Gold Survey: Q3 2015 Review and Outlook


· Physical gold demand in Q3 2015 was up by 7% year-on-year, thanks to an increase in net official sector buying and a stellar level of retail purchases of bars and coins.

·Jewellery fabrication, the largest consuming sector, was marginally lower year-on-year, as higher demand in India was offset by a slow recovery in Chinese offtake, although demand in the latter was not as bleak as in the first half.

·Total gold supply was slightly higher in the third quarter, largely thanks to a 3% increase in global scrap supply, while mine production remained broadly flat compared to a year ago.

·Gold is set to remain under pressure as Fed uncertainty continues to weigh on the sentiment.

In country markets, India regained its top position as the largest overall consumer of gold this year through the third quarter. Total consumption amounted to 642 tonnes in the first nine months, with China trailing by 63 tonnes.


Jewellery consumption increased by 5% year-on-year to an estimated 193 tonnes in Q3 2015, the highest quarterly consumption since Q1 2011 and the highest third quarter demand since 2008. Retail investment rose 30% year-on-year to 55 tonnes, the highest since Q4 2013. Gains in the third quarter were primarily attributed to the fall in the local gold price to the lowest since August 2011. Gross official imports to India in Q3 2015 were 263 tonnes, up by 23% year-on-year and also the highest quarterly volume year-to-date.


After a lacklustre second quarter this year, which was the lowest second quarter recorded since 2011, China’s gold demand rebounded in the third quarter. Total gold demand amounted to 196 tonnes for the period, a modest 3% year-on-year improvement. The improvement in gold demand during the third quarter was driven by several factors. Firstly, now that the extraordinary performance of the domestic stock market has come to an end and many investors have lost faith in the equity market, gold has regained its attractiveness as an alternative investment vehicle.

Secondly, demand for gold, both in the form of jewellery and investment bars, picked up immediately after the gold price breached $1,100 in mid-July, also helped by an uptick in seasonal demand lead by Chinese Valentine’s Day in August and the Autumn festival in September.

Another game changer had been the official depreciation of the yuan, which was announced on 11th August. The announcement raised fears of further depreciation in the future and helped to boost gold’s safe haven appeal, although many continue to view the US dollar as the ultimate safe haven asset.

Meanwhile, after announcing a 604 tonnes increase in gold holdings in June, the People’s Bank of China reported further acquisitions in each month of the third quarter.


On the supply side, according to our initial estimates global mine production remained broadly flat in Q3 2015, up by less than 1% year-on-year, with production provisionally estimated at 851 tonnes. De-hedging is estimated to have prevailed with ongoing deliveries into hedges likely to have exceeded fresh hedging activity.

Supply from scrap continued to recover for the second quarter in a row, rising by 3% in Q3 2015, mainly thanks to stunning gains in India and Turkey, of 48% and 154% respectively. Excluding these countries, total scrap in the rest of the world declined by 5% year-on-year.

Market balance:

With only a marginal growth in total supply, the 7% increase in physical demand led to a smaller surplus in the market of 51 tonnes for Q3 2015.

Investor Sentiment:

Investors have in general remained cautious, as uncertainty around the timing of the first US rate increase has continued to weigh on sentiment. That said, the persistent lack of inflation and emerging market concerns pushed back rate expectations, providing a temporary boost to the gold price. CFTC-reported Managed Money data on COMEX, as of the 20th October, shows a long speculative position in gold (futures and options) at its highest since Feb. 2015. ETF gold holdings declined by 61 tonnes in the third quarter, although buying seems to have returned in October.

Price Outlook:

We expect gold to trade back down below $1,100/oz in Q4 2015 which brings an annual average of $1,159/oz in 2015. Gold is set to remain under pressure until there is more clarity on the timing and the scale of US rates normalisation. Among other bearish factors are low inflation expectations and generally weak investor sentiment towards precious metals. That said, gold may draw some support from a seasonal uptick in physical demand towards year-end, and the prospects look brighter for the next year.


For more information about the sector, please come to our conference in Shenzhen on December 3rd-4th, 2015. You can learn more at



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