Gold's Allure Undimmed: Global Demand Surges to 1,238 Tonnes in Q1 Despite Price Spike

Global gold demand rose 3% in Q1 2024 to 1,238 tonnes, driven by OTC purchases, central bank buying, and Asian demand. Central banks added 290 tonnes to official holdings. Investment demand remained strong, with bar and coin investment rising by 3% year-on-year. Gold ETFs faced outflows, while technology demand recovered due to AI growth. Mine production and recycling increased. Despite high gold prices, geopolitical risks and macroeconomic uncertainty boosted gold demand as a safe-haven asset. Eastern investors became more price-sensitive buyers, while Western investors bought into the rally. Experts anticipate a strong return for gold in 2024, with price-sensitive buyers potentially re-entering the market.

Global gold demand went up marginally 3 per cent in January-March period to 1,238 tonne, strongest quarter since 2016, despite high prices, according to World Gold Council.

In its 'Q1 2024 Gold Demand' trends report, the World Gold Council (WGC) highlighted that the total global gold demand (inclusive of over the counter purchases) was up 3 per cent year-on-year to 1,238 tonne.

Over the-counter (OTC) transactions take place directly between two parties, unlike exchange trading which is conducted via an exchange.

Demand excluding OTC fell 5 per cent to 1,102 tonne in the January-March period compared to the same period in 2023.

''Healthy investment from the OTC market, persistent central bank buying, and higher demand from Asian buyers helped drive the gold price to a record quarterly average of USD 2,070/oz 10 per cent higher year-on-year and 5 per cent higher quarter-on-quarter,'' WGC said.

The council noted that Central banks continued to buy gold apace, adding 290 tonne 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,'' the report said.

Turning to investment demand, WGC said that bar and coin investment increased 3 per cent year-on-year, remaining steady at the same levels from Q4 of 2023 at 312 tonne.

Gold ETFs continued to see outflows with global holdings falling by 114 tonne, 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,'' the report said.

Global jewellery 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, it said.

In addition, demand for gold in technology recovered 10 per cent year-on-year driven by the AI (artificial intelligence) boom in the electronics sector.

On the supply side, the WGC said that mine production increased 4 per cent year-on-year to 893 tonne- a record first quarter.

Recycling also reached the highest level since Q3 2020, jumping 12per cent year-on-year to 351 tonne, as some investors saw the high price as an opportunity to take profits.

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

In addition, he said 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,'' Street said.

Looking ahead, he said the year 2024 is likely to produce a much stronger return for gold than 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,'' Street said.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)