Gold demand strongest since 2016: World Gold Council

GLOBAL gold demand went up marginally by three per cent in January-March period to 1,238 tonne, strongest quarter since 2016, despite high prices, according to World Gold Council (WGC).

In its 'first quarter 2024 gold demand' trends report, the WGC highlighted that the total global gold demand (inclusive of over the counter purchases) was up three 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 five 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 $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.

It added that bar and coin investment increased three per cent year-on-year, remaining steady at the same levels from fourth quarter 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 two 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 four per cent year-on-year to 893 tonne- a record first quarter.

Recycling also reached the highest level since third quarter of 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 WGC, 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."

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 first quarter, 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 added.

(PTI)