Global gold demand hit its highest in more than two years in the third quarter as price drop in July boosted the buying of jewellery, coins and bars, the World Gold Council said on Thursday.

Overall demand reached 1,121 tonnes in the last quarter, up 8 per cent year-on-year to its highest since the second quarter of 2013. The rise was tempered by increased outflows from bullion-backed exchange-traded funds, however.

Bar and coin buying more than tripled in the United States to a five-year high of 32.7 tonnes, and also rose 70 per cent in China and 35 per cent in Europe. That followed a more than 6 per cent slide in spot gold prices in July, their biggest monthly drop in two years.

“The price dip represented a buying opportunity for people to dive into the market and increase their gold exposure,’’ Alistair Hewitt, World Gold Council's (WGC) market intelligence manager, said.

“The additional degree of uncertainty that has been imbued within people as a result of the financial crisis underpins people’s desire for gold bars and coins. When you have that as an underlying factor, and you see a price dip, that represents an opportunity for you to increase your gold holdings.’’

European demand was also lifted by concerns over Greece’s financial position and geopolitical tensions in eastern Europe, the WGC said. Chinese demand, meanwhile, was boosted by the devaluation of the yuan.

Jewellery buying, the largest segment of demand, was buoyant in number one consumer India, which vies for that position with China. Consumption rose 15 per cent in the last quarter to 211 tonnes, while Chinese jewellery demand climbed 4 per cent to 203 tonnes.

Buying fell in some smaller key markets such as Russia and Turkey, however. Turkish jewellery demand fell 29 per cent to 12.1 tonnes, while Russian buying dropped 19 per cent to 13.5 tonnes.

However, outflows from gold ETFs — popular investment vehicles which issue securities backed by physical metal — increased by 24 tonnes year-on-year to 65.9 tonnes, helping to offset the rise in demand elsewhere.

Central bank buying, while remaining firm, also retreated 4.5 tonnes to 175 tonnes in the third quarter.

Supply edged up 1 per cent, driven by fresh producer hedging, though both mine and recycling supply retreated.

For the full year, the WGC is maintaining its forecast for global gold demand of 4,200-4,300 tonnes, close to last year’s four-year low of 4,217 tonnes, Hewitt said.

Chinese demand is still expected to total 900-1,000 tonnes, though the WGC has downgraded its expectations for Indian demand from that level to 850-950 tonnes.

“We have ongoing issues within the rural community with the monsoon. In the first half of the year it was quite clear that unseasonal rains had affected agricultural incomes, and (rural) demand was softer than expected,’’ Hewitt said.

“We also have the factor of prices ... increasing later on in the quarter.’’

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