Gold Market Enjoys Strong Start in 2024
The gold market had a strong start to 2024, marking its best beginning to a year since 2016. The World Gold Council’s latest report highlights robust Asian demand and record central bank purchases as dominant factors in the marketplace.
The report shows that global physical gold demand, including Over-the-Counter purchases, increased by 3% to 1,238 tonnes compared to the first quarter of 2023. Excluding the OTC market, gold demand dropped by 5% to 1,102 tonnes due to outflows in gold-backed exchange-traded funds.
In an interview with Kitco News, Juan Carlos Artigas, Head of Global Research at the WGC, emphasized the strong demand coming from Asian consumers, particularly Chinese investors. This demand has been a significant driver across various segments of the gold market.
Asian Market Continues to Drive Demand
Asian consumers, led by Chinese investors, have been actively participating in the gold market, contributing to healthy jewelry demand, investment inflows into exchange-traded funds, and transactions in the OTC market. This trend indicates that there is still room for growth in the market, especially among Western investors who are yet to fully capitalize on the opportunities presented by gold.
Central Banks Show Strong Appetite for Gold
Central banks worldwide have been relentless in their gold purchases, with net demand totaling 290 tonnes in the first quarter of 2024 – the strongest start to any year on record. Central banks are drawn to gold as a powerful diversifier for their foreign reserves, especially in an environment where the US dollar dominates as the sole reserve currency.
Despite the recent surge in gold prices, central banks are expected to remain healthy net buyers of gold, signaling a continued upward trend in their demand. This trend not only enhances their reserve holdings but also provides them with a stable asset that carries no counterparty risk.
Weaker Investor Demand Challenges Gold ETFs
Investor demand for gold-backed exchange-traded funds has been weak, with global Gold ETF holdings dropping by 114 tonnes in the first quarter of 2024. This decline, driven by North American and European funds, reflects the challenging environment created by higher interest rates and positive real yields in global bond markets.
The Federal Reserve’s decision to delay its easing cycle is expected to further impact investor sentiment and could result in continued struggles for the gold market, especially in the ETF segment.
Jewelry Demand Faces Pressure Despite Long-Term Strength
While jewelry demand for gold faced some pressure in the first quarter of 2024, it remains above average when viewed in the context of the past five years. The trend indicates a stable long-term demand for gold jewelry, with significant support from Eastern markets such as India.
Additionally, the gold market witnessed surprising growth in technical applications, driven by supply chain restocking and emerging AI-related opportunities. This suggests a positive outlook for technology demand in the gold market throughout the year.
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