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By Dai Qi

Global gold demand was steady in the third quarter (Q3) this year at 964 tonnes, up 6 tonnes year on year, according to the World Gold Council's latest Gold Demand Trends report.

Robust central bank buying and a 13-percent rise in consumer demand offset large outflows in gold-backed exchange-traded funds (ETFs).

Lower gold prices saw retail investors take refuge in gold bars and coins, while jewellery purchases increased in India, China and across South-East Asia.

Gold bar and coin investors took advantage of the price dip, with demand up 28 percent year on year. Stock market volatility and currency weakness boosted demand in many emerging markets.

China, the world's largest gold bar and coin market, saw a demand rise of 25 percent to 86 tonnes year on year. Iranian demand for gold hit a five-and-a-half year high at 21 tonnes.

"This re-emphasised gold's unique role as a risk hedge for investment portfolios," said Roland Wang, managing director of the World Gold Council in China.

Jewellery demand in the Q3 saw a price-led year-on-year growth of 6 percent. Lower gold prices during July and August encouraged bargain hunting among price-sensitive consumers. Growth in India and China, up 10 percent in these regions, outweighed weakening demand in the Middle East, which was down 12 percent.

"Jewellery consumption in China is often driven by occasion-buying, as we saw this quarter. The Qixi  (Chinese Valentine's Day) and the Mid-autumn holiday season that began in the Q3 led to a continued growth in the Chinese jewellery demand, as marketers took up opportunities to initiate marketing campaigns designed to promote sales and strengthen brand loyalty," said Wang.

Central banks' gold reserves grew to 148 tonnes in Q3, up 22 percent year on year. The gold reserves represent the highest level of net purchases by the central banks since 2015, both quarterly and year-to-date. This quarter was particularly notable due to a greater number of buyers.

The demand for gold in technological applications rose in Q3 by 1 percent year on year, to 85 tonnes. This growth marks the eighth consecutive quarter of growth, primarily driven by gold's use in electronics such as smartphones, servers and the automotive industry.

ETF outflows reached 103 tonnes in Q3, the first quarter for these outflows was in Q4 of 2016. North America accounted for 73 percent of the outflows, fuelled by risk-on sentiment, a strong dollar and price-driven momentum.

"The physical market responded quickly when the gold price breached 1,200 U.S. dollars per ounce threshold in August, with retail investors around the world diving into the market. And there are welcome developments in the central bank space. They're buying a lot, and we see new central banks enter the market as they look to hedge their dollar exposure," said Alistair Hewitt, head of Market Intelligence at the World Gold Council.

The total supply of gold decreased slightly in Q3, down 2 percent, as de-hedging continued for a second consecutive quarter, and lower gold prices and economic improvement in the US and Europe discouraged recycling.

In contrast, gold mine production in Q3 registered its sixth consecutive quarter of growth, up 2 percent to 875 tonnes and is the highest level of quarterly output on record.

A combination of growth from key producing countries, such as Russia and Canada, as well as the improving production pipeline will be supportive factors for further growth in 2018, according to the report.