The World Gold Council (WGC) recently released its third quarter Gold Demand Trends. Year-to-date demand totaled 2,972 tonnes, 10% below the same period in 2019. The pandemic caused jewelry and central bank demand to plummet; jewelry demand is down 42% from last year, while central banks bought 66% less. This was partially offset by record investment demand from gold bullion exchange traded products (ETPs) and strong bar and coin demand. (We expect pandemic-related demand weakness to continue into 2021.)
According the WGC, year-to-date, total mine supply of 2,477 tonnes was down 5% from last year due mainly to lockdowns earlier in the year. Recycled scrap, at 944 tonnes, was roughly equal to last year. Total supply of 3,421 tonnes resulted in a substantial surplus of 449 tonnes. Despite the 15% supply surplus, the gold price has gained 23.8% this year.
As we always tell investors, physical supply-demand fundamentals used for other commodities don’t work for gold. Unlike other commodities, gold is a financial asset that is hoarded like stocks, bonds or currency. This year’s surplus is a drop in the ocean relative to the above-ground stock of gold, which the vast majority of owners are happy to keep at current prices. Bull markets are driven by investment demand for gold as a safe haven and store of wealth.
MVIS Global Junior Gold Miners Index vs. Gold Price
10/31/2019-10/31/2020
