Lower gold prices and high economic uncertainty prompted investors to flock to gold coins as a hedge in the third quarter of 2022. Our survey of six major mints showed that international bullion gold coin sales rose substantially in the period and were up by a significant 21% year-on-year to 48 tonnes.
In the nine months to September, coins sales rose to 155 tonnes, which was up 10% from the corresponding period of the previous year. If coin demand growth remains resilient in Q4, this year will overtake 2021 as the best year for coin sales since our records began in 1987. Sales in value terms increased by 17% to nearly $2.7 billion in Q3. This was despite a 3% year-on-year fall in the average dollar gold price.
Regional Analysis
On a geographical basis, all regions barring Africa registered an increase in the third quarter. North America, with a market share of 50%, remained the largest market for coins, followed by Europe. Additionally, appetite for the yellow metal in Japan picked up after declining for four consecutive quarters.
Sales in North America hit 24 tonnes, registering a 19% increase from the same period last year. The share of the North American market, however, slipped to 50% from 51% in the corresponding period of 2021. This was partly due to an increase in Europe’s market share. Aggressively hawkish monetary measures by the US Federal Reserve managed to put a pause on sky-high inflation, but not enough to halt the market volatility stemming from investors’ fears. While equities and other risky assets were sold off, retail investors flocked to buy gold coins as an ‘inflation hedge’.
In the second-largest market, Europe, coin sales rose by 29% to 21 tonnes. The share of Europe, meanwhile, rose to 44%, from 42% in the corresponding period of last year. Concerns about higher inflation as central banks hike rates to bring it under control underpinned retail investment. Also, the dwindling health of the global economy amidst geopolitical concerns stemming from the protracted Russia-Ukraine war has nudged investors towards coins.
Meanwhile, sales in Africa continued to fall in Q3, and were down 67% in the reporting quarter to 0.6 tonnes. Sales rose, however, by 87% in the ‘Other’ region.
Elsewhere, sales in Japan increased by 75% to 0.7 tonnes in Q3, representing just 1% of the global coin market. Coin sales in our ‘Other Asia’ region also registered an increase and were up by 37% in Q3. Demand improved across Southeast Asian countries as a decline in prices for gold made it an attractive purchase. The largest consumer, China, also saw an improvement in demand for coins due to the release of pent-up demand following the easing of COVID-related restrictions, while the prices were also attractive to investors. Indian investors also took advantage of the lower prices. Customers booked gold coins in advance for the upcoming festival season.
Outlook:
With the latest data hinting that US Inflation may have peaked, there were hopes that the US Federal Reserve might slow the pace of its aggressive monetary policy tightening. At the last meeting in November, the central bank raised rates by 75 basis points, making it the fourth consecutive hike of this magnitude. However, inflation remains far above the Fed’s target and feedback has signified that more increases are needed until there is a substantial impact on inflation. One thing is certain, high interest rates are here to stay and gold typically does not perform well in a high-interest rate environment. Positive returns in the yield curve will continue to put pressure on gold for the remainder of the year. However, that said, there is continued economic uncertainty globally, sky-high inflation and year-on-year falls in gold prices such that the aforementioned factors may continue to support coin demand in the last quarter.
