By Polina Devitt

LONDON Global gold demand excluding over-the-counter (OTC) trading slipped 6% in the third quarter as central bank buying fell short of last year's record levels and consumption by jewellers declined, the World Gold Council (WGC) said on Tuesday.

The quarter's demand of 1,147.5 metric tons however stood 8% ahead of its five-year average, and official sector purchases in the full year are expected to approach their 2022 level, the WGC said in its quarterly demand trends report.

Gold demand shot to an 11-year high in 2022 due to the biggest central bank purchases on record.

"With geopolitical tensions on the rise and an expectation for continued robust central bank buying, gold demand may surprise to the upside," said Louise Street, senior markets analyst at the WGC.

Spot gold prices hit $2,009.29 an ounce on Friday, surpassing the key psychological $2,000 level for the first time since mid-May, as investors piled into safe-haven bullion amid the Middle East conflict.

Demand from investors, who see bullion as a safe asset during periods of instability, rose 56% in the third quarter, but remained weak compared to the five-year average, the WGC said.

Central bank demand totalled 337.1 tons, down from a record 458.8 tons a year before. For the first nine months of 2023 however, official sector gold purchases hit 800 tons, more than in any January-September period in WGC data going back to 2000.

"This strong buying streak from central banks is expected to stay on course for the remainder of the year, indicating a robust annual total again in 2023," WGC said.

Buying of gold bars and coins fell by 14% in July-September with lower demand in Europe. Outflows from exchange traded funds (ETFs) storing bullion for investors continued due to investor sentiment that interest rates would remain high.

Including OTC trading, which is conducted directly between two parties rather than via an exchange, total global gold demand rose 6% to 1,267.1 metric tons in the third quarter.

QUARTERLY GOLD SUPPLY AND DEMAND (tonnes)*

SUPPLY Q3 2023 Q2 2023 Q3 2022 y/y %

change

Mine production 971.1 912.7 949.1 +2

Net producer hedging 7.2 -19.5 -26.8

Recycled gold 288.8 322.9 268.3 +8

Total supply 1,267.1 1,216.1 1,190.6 +6

DEMAND Q3 2023 Q2 2023 Q3 2022 y/y %

change

Jewellery fabrication 578.2 492.8 582.6 -1

Technology 75.3 70.4 77.3 -3

- of which electronics 61.1 56.4 63.5 -4

- other Industrial 11.8 11.6 11.3 +4

- dentistry 2.3 2.4 2.5 -6

Investment 156.9 255.7 100.5 +56

- of which bar and coin 296.2 276.8 344.2 -14

- ETFs & similar products -139.3 -21.1 -243.7

Central banks & other inst. 337.1 174.8 458.8 -27

GOLD DEMAND 1,147.5 993.7 1,219.2 -6

OTC and other 119.6 222.4 -28.6

TOTAL DEMAND 1,267.1 1,216.1 1,190.6 +6

LBMA gold price, $/oz 1,928.5 1,975.9 1,728.9 +12

* Source: World Gold Council, Gold Demand Trends Q3 2023

(Reporting by Polina Devitt; Editing by Jan Harvey)