TOKYO -- Global demand for gold is recovering, as Asian consumers step up jewelry purchases in hopes of higher prices down the road, and as a hedge against weakening currencies at home.
Demand for the precious metal edged up 1% on the year to about 964.3 tons in the July-September quarter, the World Gold Council said Thursday.
Jewelry demand expanded year-on-year in most Asian countries, driving a 6% global increase to 535.7 tons. Demand climbed 10% on the year in both India and mainland China, which together account for a majority of the world's consumption, and rose in Southeast Asian countries like Vietnam and Indonesia as well.
International benchmark gold futures began falling more steeply in June on expectations the U.S. would continue to raise interest rates. They reached a 19-month low in mid-August amid a dollar rally sparked by the Turkish lira's plunge.
"When gold prices fall, gold-consuming Asian countries tend to buy more," said Takahiro Morita, an adviser to the WGC.
In India, not only has demand for gold suffered since the government rolled out a goods and services tax in July 2017, but a softer currency has also made the metal 4% to 5% more expensive in rupee terms compared with early this year. Nevertheless, buying by individuals was brisk in the third calendar quarter.
Global demand for gold coins and ingots also soared 28% to 298.1 tons, with the commodity bought by individuals in anticipation of higher prices, and as a defensive asset to hedge against inflation. Iran, which was again placed under U.S. sanctions, saw such purchases skyrocket 240% from last year, while Asian countries experiencing currency depreciation also saw gains.
Brisker demand, however, was offset by outflows of investment capital from gold ETFs. A slump in buying of ETFs backed by physical gold appears as a decrease in the amount of gold holdings. Holdings in these ETFs fell by 103 tons compared with a year earlier, the WGC said.
Central banks are also steadily buying more of the metal as countries increase the portion of their foreign-exchange reserves held in gold. Purchases by the public sector totaled 148.4 tons, the largest increase since October-December 2015, and Russia's holdings surpassed 2,000 tons for the first time.