Global gold demand stays strong, supporting record-high prices

NEW DELHI: Global gold demand was up 3 per cent year-on-year at 1,238 tonnes in the first quarter of 2024, marking the strongest first quarter since 2016, according to the World Gold Council's Gold Demand Trends report.

The demand for the yellow metal, excluding over-the-counter sales, fell 5 per cent to 1,102 tonnes as compared to the same period of 2023.

Healthy investment, persistent buying by central banks, and higher demand from Asian buyers helped drive the gold price to a record quarterly average of USD 2,070 per ounce, 10 per cent higher year-on-year and 5 per cent higher quarter-on-quarter.

Central banks continued to buy gold apace, adding 290 tonnes to official global holdings during the quarter. Turning to investment demand, bar and coin investment increased 3 per cent year-on- year, remaining steady at the same levels from the fourth quarter of 2023 at 312 tonnes.

Global jewelry demand remained resilient, despite record-high prices, only falling 2 per cent year-on-year. Demand in Asia countered decreases in both Europe and North America. In addition, demand for gold in technology recovered 10 per cent year-on-year driven by the Al boom in the electronics sector.

On the supply side, mine production increased 4 per cent year- on-year to 893 tonnes, a record first quarter. Recycling also reached the highest level since the third quarter of 2020, jumping 12 per cent year-on-year to 351 tonnes, as some investors saw the high price as an opportunity to take profits.

"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'," Louise Street, Senior Markets Analyst at the World Gold Council.

"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."

Historically, gold, as an asset, is considered to be a haven as it typically manages to retain or appreciate its underlying value in times of turbulence.

Further, interestingly, the gold market is witnessing shifting behavior trends from Eastern and Western investors, Street said. 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." Demand for gold in India for the first quarter of 2024 was 136.6 tonnes, up by 8 per cent as compared to overall first- quarter demand for 2023 at 126.3 tonnes.

Looking ahead, 2024 is likely to produce a much stronger return for gold than the World Gold Council anticipated at the beginning of the year, said Street.

"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."