NEW YORK, Nov 9 (Reuters) - Weaker gold prices boosted investment demand during the third quarter, but gains were capped by a sell-off in gold-backed exchange-traded funds (ETFs), the GFMS metals consultancy at Refinitiv said on Friday.
The price of gold dropped nearly 5 percent in the third quarter as investors continued to favor the U.S. dollar and riskier assets during a global trade war.
"Sentiment in the investment sector remained largely gold-averse over the third quarter and it is arguable that the price performance, not only in U.S. dollar terms, but in other major currencies as well, became largely self-fulfilling," GFMS said in a statement.
Holdings of gold-backed ETFs declined nearly 4 percent to 2,221 tonnes at the end of the third quarter from 2,312 tonnes in the prior quarter. Net outflows at the end of the third quarter totaled $3.5 billion.
Global physical demand rose nearly 8 percent to 1,010 tonnes, the highest on a quarterly basis since the fourth quarter of 2017.
Global retail investment, including coin and bar demand, was mixed. Coin demand increased nearly 20 percent to 73 tonnes from the second to third quarter and rose 16 percent year over year. Bar prices edged down to 175 tonnes in the third quarter from 176 tonnes in the second quarter, GFMS data showed.
Jewelry consumption declined 2 percent from 474 tonnes in the second quarter to 466 tonnes in the third quarter.
Supply totaled 1,118 tonnes in the third quarter, up more than 3 percent from the prior quarter.
Trade tensions and European Union bartering supported gold above $1,180, GFMS said, and "this is leading short-side traders to lock in profits."
It estimated gold prices to average $1,224 per ounce in the fourth quarter and $1,285 for 2018.
(Reporting by Renita D. Young; Editing by Richard Chang)