Gold Demand Strong, Driven By China

Amanda Cheesley Deputy Editor May 2, 2024

Gold Demand Strong, Driven By China

The World Gold Council this week released its first quarter 2024 “Gold Demand Trends Report.”

The latest report by the World Gold Council reveals that total global gold demand was up 3 per cent year-on-year reaching 1,238 tonnes, marking the strongest first quarter since 2016.

Healthy investment from the over-the-counter (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, according to the World Gold Council.

Central banks bought gold apace, adding 290 tonnes 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 reveals. 

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.

Quilter Investors also highlighted this week the significant increase in the price of physical gold. “The recent outperformance of Quilter Investors Precious Metals Equity fund, primarily investing in gold-related equities such as gold mining stocks, has been particularly pleasing," Stuart Clark, portfolio manager at Quilter Investors, said in a note. 

According to the World Gold Council, gold exchange-traded funds (ETFs) continued to see outflows with global holdings falling by 114 tonnes, led by North American and European funds but slightly offset by inflows into Asian-listed products. China generated the bulk of that rise, with renewed investor interest in gold due to the weakening local currency and poorly performing domestic equity markets, the report shows. 

In fact, China has built up a $170 billion stockpile of gold after a huge buying spree, in a move that has sparked fears that Beijing is preparing its economy for a possible conflict over Taiwan. The People’s Bank of China (PBOC) bought 27 tonnes of gold in the first three months of the year, taking its reserves to a record high of 2,262 tonnes, according to data from the World Gold Council.

China has now been buying gold steadily since October 2022, signaling its longest build up of the metal since at least 2000. Experts said China’s stockpiling was probably an effort to guard its economy against Western sanctions in the event of a conflict over Taiwan.

China has increased gold as a share of its total financial reserves from 3.2 per cent to 4.6 per cent since October 2022, according to the World Gold Council. The country now has the sixth-largest gold stockpile in the world, just behind Russia.

Nevertheless, Beijing’s stockpile does not compare with the holdings of the US, which has the largest reserves in the world. US holdings are worth $602 billion, while the UK owns $23 billion of the precious metal.

Global jewelry demand has also 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 artificial intelligence boom in the electronics sector. 

“Looking ahead, 2024 is likely to produce a much stronger return for gold than we anticipated at the beginning of the year, based on its recent performance,” Louise Street, senior markets analyst at the World Gold Council, said. “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.” 

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