"The recent positive steps by India and Sri Lanka to acquire gold suggest that central banks are increasingly looking at gold for its diversification properties. While the outlook for gold investment is healthy in western economies, trends in the non-western markets are likely to mirror the jewellery market,"
Wozniak stated that Q4 2009 is expected to be a mixed quarter. While the gold price has repeatedly tested new highs over the last few months and key jewellery markets are looking for opportunities to buy on dips, it is still too early to see where the new levels of key support will emerge now that the gold price has moved into a new trading range, she said.
Analyzing gold's Q3 2009 performance, Wozniak said that it marked the second consecutive quarter-on-quarter improvement for both jewellery and industrial demand - in the case of industrial demand, it is a clear that the turning point for demand has been reached. However, given the recent rise in the gold price, the outlook for jewellery demand remains uncertain.
"Total identifiable investment, which covers Exchange Traded Funds as well as the more traditional coins and small bars, rose 1% from the previous quarter to 227 tonnes, but declined as compared with the exceptionally high levels seen in Q3 2008. However, relative to a more 'typical third quarter', based on a 5-year average, the rise was a significant 73%, indicating that the absolute levels of investment remain high," Wozniak added.
Grant Collins, Senior Managing Director, Dubai Commodity Asset Management, said, "Gold investments are gaining favor in markets where exposure to the metal was limited until now. Uncertain economic conditions and currency fluctuations have encouraged greater allocation to gold in portfolios. We expect demand for gold investment to remain strong with investors looking for simpler and secure means to access the gold market. And the acceleration of trading in Dubai Gold Securities in since its launch earlier this year supports that view."
Total demand for gold recorded a 34% decline in tonnage terms in Q3 2009 relative to the same quarter in 2008. However, Q3 2008 being an exceptional quarter, any comparison with it distorts the true performance of gold in Q3 2009. Firstly, it was a very strong quarter for both jewellery and investment demand in key markets such as India, the Middle East, Turkey and parts of the Far East as these markets responded to the fall in gold price during the quarter. It was also a very strong quarter for western investment demand as global economic uncertainty led participants to shore up their exposure to gold. However, a comparison of Q3 2009 with the previous quarter shows a rise in total demand by 10%.
Wozniak said that global jewellery demand has been affected by higher gold prices and weakness in global economic conditions. Nevertheless, in the Middle East, jewellery demand in Q3 2009 reflects a marked improvement on the very low levels of demand seen in Q1 2009, although it declined as compared with Q3 2008.
The biggest improvement was in Saudi Arabia in Q3 2009, where jewellery demand was up almost 70% on Q1 levels.