The World Gold Council’s Q1 2024 Gold Demand Trends report reveals that total global gold demand (inclusive of OTC purchases) was up 3% year-on-year to 1,238t, marking the strongest first quarter since 2016. Demand excluding OTC fell 5% to 1,102t in Q1 compared to the same period in 2023.
Healthy investment from the OTC market1, persistent central bank buying, and higher demand from Asian buyers, helped drive the gold price to a record quarterly average of US$2,070/oz-10% higher year-on-year and 5% higher quarter-on-quarter.
Central banks continued to buy gold apace, adding 290t to official global holdings during the quarter. Consistent and substantial purchases by the official sector highlight gold’s importance in international reserve portfolios amidst market volatility and increased risk.
Turning to investment demand, bar and coin investment increased 3% year-on-year, remaining steady at the same levels from Q4 2023 at 312t.
Gold ETFs continued to see outflows with global holdings falling by 114t, led by North American and European funds but slightly offset by inflows into Asian-listed products. China generated the bulk of that increase, with renewed investor interest in gold due to the weakening local currency and poorly performing domestic equity markets.
Global jewellery demand remained resilient, despite record-high prices, only falling 2% year-on-year. Demand in Asia countered decreases in both Europe and North America.
In addition, demand for gold in technology recovered 10% year-on-year driven by the AI boom in the electronics sector.
On the supply side, mine production increased 4% year-on-year to 893t-a record first quarter. Recycling also reached the highest level since Q3 2020, jumping 12% year-on-year to 351t, as higher prices were an opportunity for some to cash in on their old gold jewellery.
Louise Street, Senior Markets Analyst at the World Gold Council, commented: “Since March, the gold price has climbed to all-time highs, despite traditional headwinds of a strong US dollar and interest rates that are proving to be ‘higher for longer’.
“A number of factors are behind the recent surge including heightened geopolitical risk and ongoing macroeconomic uncertainty driving safe-haven demand for gold. In addition, the continued and resolute demand from central banks, strong OTC investment and increased net buying in the derivatives market, have all contributed to the higher price of gold.
“Interestingly, we are witnessing shifting behaviour trends from Eastern and Western investors. Typically, investors in Eastern markets are more responsive to the price, waiting for a dip to buy, whereas Western investors have historically been attracted to a rising price, tending to buy into the rally. In Q1, we saw those roles reversed with investment demand in markets such as China and India growing considerably as the gold price surged.
“Looking ahead, 2024 is likely to produce a much stronger return for gold than we anticipated at the beginning of the year, based on its recent performance. Should the price level off in the coming months, some price-sensitive buyers may re-enter the market and investors will continue to look to gold for a safe haven asset as they seek clarity around rate cuts and election results.”