Gold Demand Shines Bright Amid Record Prices
The global gold market has started 2024 on a strong note, with demand rising 3% year-over-year to 1,238 tonnes in the first quarter - the strongest first quarter since 2016. This robust demand has helped support gold prices, which reached a series of record highs during the period.
Central Banks Lead the Charge
Central banks have been the primary drivers of this increased demand, buying 228 tonnes of gold in Q1 2024, a staggering 176% higher than the previous year and the strongest start to a year since 2016. This follows a record-breaking year for central bank gold purchases in 2023. Analysts attribute this trend to central banks, particularly in emerging markets, seeking to diversify their reserves away from the US dollar. This trend is expected to continue, providing a strong foundation for gold demand.
Investors Seek Safe Haven
Investors have also contributed to the demand growth, with bar and coin investment firming up, particularly in China, where gold is seen as a safe haven amid currency volatility and limited investment alternatives. Substantial buying in the opaque over-the-counter (OTC) market by investors also significantly boosted overall demand. However, while Western investors remained active buyers, they also engaged in healthy profit-taking as prices surged. In contrast, Eastern markets saw strong buying into the rising prices.
Regional Variations
The demand picture varied across different regions. Gold recycling increased in some markets like China in response to higher prices, but this was offset by a depletion of near-market stocks in India. In the Middle East, gold demand in the UAE increased by 30% year-on-year in Q1 2024, driven by strong economic recovery, increased tourism, and Expo 2024 Dubai. However, demand in Saudi Arabia and Kuwait saw a slight decline due to the high gold prices.
2024 Outlook: Resilience Amid Challenges
Looking ahead, total gold investment, including OTC, is expected to be higher in 2024. Early weakness in gold ETFs will likely reverse by mid-year, supported by anticipated interest rate cuts and ongoing geopolitical risks. However, record high prices may constrain growth in the more price-sensitive jewelry and bar and coin segments, especially in emerging markets like India and China.
Despite these challenges, the gold market has demonstrated remarkable resilience in the face of record prices. Central banks and investors continue to drive demand, highlighting gold's enduring appeal as a safe haven asset and a tool for diversification. As the world navigates an uncertain economic landscape, gold is poised to continue shining bright in 2024.