In the first quarter of 2024, the demand for safe-haven gold reached its highest level in seven years, according to the World Gold Council. Total bullion demand, including over-the-counter trades, increased by 3% year-on-year to 1,238 tonnes. However, excluding over-the-counter business, gold demand decreased by 5% compared to the same period in 2023, totaling 1,102 tonnes. Average gold prices rose by 10% year-on-year in quarter one, reaching an all-time high of $2,070 per ounce.
The rise in gold prices was attributed to macroeconomic and geopolitical factors driving demand for the flight-to-safety asset. The WGC highlighted factors such as healthy investment from the OTC market, persistent central bank buying, and higher demand from Asian buyers as drivers for the increase in gold prices. Gold continued to climb in early April, reaching fresh record highs of $2,364 per ounce before settling at $2,314.
Central banks played a significant role in driving demand for gold in the first quarter, with purchases totaling 296 tonnes, the strongest start to any year on record. The WGC acknowledged that central bank demand is crucial for gold’s performance amidst challenging conditions such as higher yields and US dollar strength. Central banks’ consistent and substantial purchases highlight gold’s importance in international reserve portfolios during market volatility and increased risk.
While central bank demand remained strong, gold-backed exchange-traded funds (ETFs) experienced outflows totaling 114 tonnes between January and March. Outflows were seen in North America and Europe, but Asian funds saw an increase in holdings. The WGC attributed the rise in Asian fund holdings to renewed investor interest in gold due to the weakening local currency and underperforming domestic equity markets.
Despite record-high gold prices, demand from the global jewellery sector remained resilient in the first quarter, although consumption dipped by 2% year-on-year. The WGC noted that demand in Asia offset decreases in Europe and North America. Furthermore, demand from the technology sector surged by 10% year-on-year due to the AI revolution. On the supply side, mine production reached record quarterly peaks of 893 tonnes, up 4% year-on-year, while recycled material also increased by 12%.
Looking ahead, the WGC expects sustained interest from emerging market central banks and retail investors to continue supporting strong gold demand throughout the rest of the year. Despite disappointing interest from the West, the WGC anticipates a stronger return for gold in 2024 based on its recent performance. If gold prices stabilize in the coming months, price-sensitive buyers may re-enter the market, and investors will continue to seek gold as a safe-haven asset amid uncertainty surrounding rate cuts and election results.
