In the third quarter of 2020, investment demand for gold has risen 21% compared to the same period in the previous year. That’s according to data obtained by the World Gold Council, one of the world’s leading authorities in the market.
The rise in demand comes in the wake of financial uncertainties caused by the COVID-19 crisis and the subsequent lockdown orders. Since gold is famous for remaining stable even in times of financial uncertainty, it is no surprise that many investors have chosen to diversify their portfolios to include more gold-related products.
However, the COVID crisis hasn’t been good news for all sectors of the gold market. While the demand of investors has increased, regular consumers have cut back on their demand for gold jewelry and other luxury gold products. As a result, the World Gold Council (WGC) reported that global gold demand dropped by 19% in the last quarter if compared to the same period in 2019.
The gold demand in Q3 2020 was the lowest quarterly total since 2009, when the world was reeling from the last financial crisis.
One of the reasons for the lower demand is the financial strife that has struck large sections of the global population. But that is not the only reason. In the wake of increased investor demand, the price of gold in the United States and around the world has skyrocketed.
“The US dollar gold price rose to a record high of US$2,067.15/oz in early August,” states the WGC. “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.”
So, while demand for gold was lower, the price of each sold gold product was also higher than it would have been otherwise. Prices were also affected by complications in the extraction and distribution of gold products. The WGC reports that the total supply of gold last quarter was 3% lower than it had been the previous year.
Still, the relative stability of gold as a commodity spells good news for the nations that produce most of the world’s gold. Right now, China is number one on that list, producing an estimated 383 tons of gold every year. The United States is number 4, with an estimated production of 200 tons annually.
Most of the USA’s gold production happens in a single state. 70% of the gold produced in the US comes from Nevada, where companies like Golden Independence operate some of the biggest gold extraction operations in the world. And in November, Golden Independence announced that they’d be extending and expanding their flagship extraction project in Nevada, following favorable results in 2020.
“The experienced drilling crew and favorable drilling conditions at Independence have kept costs around 40% under budget to date, allowing the significant program expansion,” company President Tim Henneberry stated in a press release. The company is looking forward to good results in 2021 following this year’s expansion.
It’s hard to predict how long it’ll take until consumer demand for gold and jewelry returns to normal. But for now, the rising investor demand is helping the industry stay healthy.
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