Total global gold demand, inclusive of over-the-counter (OTC) purchases, was up 3% year-on-year to 1,238 tonnes (t), marking the strongest first quarter since 2016, according to a recent report.
Robust investment from the OTC market, persistent central bank buying and higher demand from Asian buyers drove the gold price to a record quarterly average of US$2,070 per ounce, finds the World Gold Council (WGC)’s Q1 2024 Gold Demand Trends report, 10% higher year-on-year and 5% higher quarter-on-quarter.
Most of the net purchases in the first quarter were made by central banks in East and Central Asia. In Singapore, the Monetary Authority of Singapore (MAS) grew its gold reserves by 2t. Other notable buyers in Asia include the Reserve Bank of India (19t), National Bank of Kazakhstan (16t), Central Bank of Oman (4t) and National Bank of the Kyrgyz Republic (2t).
“Central banks have had a significant influence on the recent performance of the gold price despite the traditional headwinds,” shares Shaokai Fan, the WGC’s head of Asia-Pacific (ex-China) and global head of central banks. The MAS’ Q1 purchase represented “the only developed market [central] bank to add to its gold reserves in the uncertain macro environment.”
Meanwhile, consumer demand reached 4t, a 20% increase year-on-year, the WGC report notes, while bar and coin demand rose by 29% to 1.8t, and jewellery consumption totalled 2.1t, 14% higher over the same period.
In addition, demand for gold in technology recovered 10% year-on-year, a move the WGC says was principally driven by the artificial intelligence boom in the electronics sector.
Gold exchange-traded funds (ETFs), however, 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.
East, West divergence
In Asia, the total assets under management of gold ETFs increased by 16% to US$11 billion, aided by inflows and a higher gold price, adding US$696 million in Q1, leading global inflows.
Holding of Asian funds rose by 10t to 147.8t. China generated the bulk of that increase, with renewed investor interest in gold due to the weakening local currency and weak domestic assets.
“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,” states Louise Street, the WGC’s senior markets analyst. “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.”
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.
