Gold investors should get ready to face emerging developments.

Byline: Shabbir Kazmi

Demand for gold dropped to 892.3 tons in Q3 - its lowest quarterly total since Q3 2009 - as consumers and investors continued to battle the effects of COVID-19. At 2,972.1 tons year-to-date (ytd) demand is 10% below the same period of 2019.

Although, jewellery demand improved from the Q2 record low, the combination of continued social restrictions, economic slowdown and a strong gold price proved burdensome for many jewellery buyers, demand of 333 tons was 29% below an already relatively feeble Q3 2019 demand.

By contrast, bar and coin demand strengthened, gaining 49% YoY to 222.1 tons. Much of the growth was in official coins, due to continued strong safe-haven demand in Western markets and Turkey, where coins are the more prevalent form of gold investment. Q3 also saw continued inflows into gold-backed ETFs, although at a slower pace as compared to the first half. Investors globally added 272.5 tons to their holdings of these products, taking ytd flows to a record 1,003.3 tons.

Central banks generated small net sales of gold in Q3, the first quarter of net sales since Q4CY10. Sales were generated primarily by two central banks - Uzbekistan and Turkey - while a handful of central banks continued steady purchases, though in smaller quantities.

Demand for gold used in technology remained weak in Q3, down 6%YoY at 76.7 tons, but the sector saw a decent quarterly improvement as some key markets emerged from lockdown.

The total supply of gold fell 3%YoY in Q3 to 1,223.6 tons, despite 6% growth in gold recycling, with mine production still feeling the effects of the COVID-19 restrictions in 1HCY20.

Following the details from a recent release of gold demand trends report for Q3 2020, one of the questions being asked frequently is how much influence the US Election will have on gold demand and performance.

The simplest answer is that while, understandably, investors are closely following the US Election for many reasons, it is just one of the many factors that influence gold at a global level. Specifically with respect to this election cycle any of the possible outcomes - whether a clear win by either Republicans or Democrats, or a contested election, will likely support one or several of the key drivers of gold demand.

Looking back, gold performance has not significantly differed based on the party controlling the White House. Since 1971, gold returns were 11% on average per year during Democratic presidencies and 10% during...