Global gold demand rose marginally by just one per cent during the third quarter of this year to 964 tonnes mainly on account of large outflows in gold-backed exchange-traded funds (ETFs), the World Gold Council (WGC) said in a report Thursday.
The overall demand in the third quarter of 2017 stood at 958 tonnes, according to WGC's 'Q3 Gold Demand Trends' report.
Electronically traded fund (ETF) outflows reached 103 tonnes in the third quarter of this year, the first outflow since the fourth quarter of 2016, it said.
North America accounted for 73 per cent of the outflow, fuelled by 'risk-on sentiment' (when investors give up safety for returns) amid a strong dollar and price-driven momentum.
However, bar and coins saw a growth of 28 per cent at 298.1 tonnes against in the September quarter this year from 233 tonnes in the year-ago period as investors took advantage of the price dip.
The report further noted that stock market volatility and currency weakness boosted demand in many emerging markets as well as in China, the world's largest bar and coin market, as it witnessed 25 per cent growth at 86 tonne from last year.
Iranian demand hit a five-and-a-half year high at 21 tonnes, the report added.
Similarly, jewellery demand also saw six per cent growth to 535.7 tonnes compared to 505.8 tonnes in the same period last year.
Lower gold prices during July and August encouraged bargain hunting among price-sensitive consumers.
Jewellery demand witnessed 10 per cent growth in India and China.
However, in the Middle East it declined by 12 per cent due to geopolitical stress.
While in Iran, jewellery demand saw the largest fall for the second consecutive quarter, following renewed economic sanctions and the steep decline in the rial, in Turkey demand was low owing to high prices political as well as economic uncertainty.
Meanwhile, central bank gold reserves grew by 22 per cent to 148.4 tonnes in the September quarter of this year, from 121.8 tonnes in the same period last year.
This is the highest level of net purchases since 2015, both quarterly and year-to-date. This quarter was particularly notable due to a greater number of buyers.
Russia, Turkey and Kazakhstan continued to account for the lion's share of purchases, while India's Reserve Bank of India, European Central Bank, the national banks of Poland and Hungary also bought gold.
Demand for gold in technological applications rose in by one per cent to 85 tonnes compared to 84.4 tonnes in July-September quarter of 2017.
This marks the eighth consecutive quarter of growth, primarily driven by gold's use in electronics like smartphones, servers and the automotive industry.
"The physical market responded quickly when the gold price breached USD 1,200 an ounce in August, with retail investors around the world diving into the market. And there are welcome developments in the central bank space. They are buying a lot and we are seeing new central banks enter the market as they look to hedge their dollar exposure," WGC Head of Market Intelligence Alistair Hewitt said.
The equity sell-off last week is a timely reminder of the threats stalking markets, valuations are stretched, debt levels are high and rising rates and quantitative tightening pose risks that an allocation to gold can help hedge, he added.
Meanwhile, in gold supply there was record quarterly mine production of 875.3 tonnes in the September quarter, which was up by 1.9 per cent, the report said.
Recycled gold totalled 306.3 tonnes in the quarter under review, down 4 per cent year-on-year, it added.