Commodities

Pandemic casts a shadow over industrial offtake of gold in Q3

Cameron Alexander | Updated on November 17, 2020 Published on November 17, 2020

Gold used in industrial applications continued to be impacted by Covid-19 and its impact on the global economy in Q3, with gold consumed in this sector declining 9 per cent on a year-on-year basis.

While the damage to consumption has been severe, there remains modest signs of a recovery with demand for semiconductors gathering momentum.

Industrial applications

The industry outlook is brighter than it has been for many months but with the global economy on knife’s edge, and with the second wave of Covid-19 starting to take hold, the industry may be in for further volatility in the coming months.

Gold consumed in industrial applications jumped 11 per cent in Q3 from the record low level registered in the previous quarter; but demand fell by nine per cent when compared to last year for the same period. Year-to-date, gold consumed in industrial applications remains 12 per cent lower than last year.

Demand from the electronics sector, which accounts for around 75 per cent of the total volume of gold consumed in this sector, fell 6 per cent in Q3, with fabrication demand year-to-date 9 per cent lower.

While consuming far less fine gold, it was dental and medical and other industrial and decorative segments that have borne the brunt of the pandemic, with demand plummeting by 20 per cent and 18 per cent, respectively.

Recovery in China

While the impact on demand has been severe this year, there is reason for optimism as we move into the final quarter of 2020 and into the New Year.

Recent official data emanating from China point to a robust recovery in Q3 that should help kickstart production growth elsewhere. However, while there has been an uptick in consumer spending in recent months, this recovery may be short-lived should a second wave of the pandemic take hold ion the West.

Outlook

The outlook for the global economy remains clouded by the uncertainty of a suitable vaccine for Covid-19.

The current situation is promising, with green shoots emerging in several markets, but how long that can last is uncertain.

We remain optimistic that several sectors will continue to expand, despite the economic doldrums, but for many other sectors a lot will depend on consumer confidence and how quickly employment levels can be returned to pre-Covid levels.

The writer is Director of Precious Metals Research at Refinitiv. Views are personal

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Published on November 17, 2020
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