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Asset Management / Wealth Management
Gold demand hits record high in second quarter
Allocations expected to continue rising over the next 12 months on diversification needs
The Asset 1 Aug 2024

Global gold demand in the three months to June rose 4% year-on-year to 1,258 tonnes, marking the strongest second quarter for the precious metal.

Demand was supported by healthy over-the-counter (OTC) transactions, up a notable 53% y-o-y at 329 tonnes, the World Gold Council (WGC) says in its latest Gold Demand Trends report.

All that glitters

Increased OTC demand, continued buying from central banks, and a slowdown in exchange-traded fund outflows drove record-high gold prices in Q2.

The gold price averaged US$2,338 an ounce, up 18% compared with a year earlier, and reached a record US$2,427/oz during the quarter.

Central banks and official institutions increased their holdings by 183 tonnes, slowing down from the previous quarter but still reflecting a 6% increase year-on-year.

According to WGC’s annual central bank survey, reserve managers believe gold allocations will continue to rise over the next 12 months, driven by the need for portfolio protection and diversification in a complex economic and geopolitical environment.

The Monetary Authority of Singapore (MAS) has increased its gold reserves by 4 tonnes to a total of 241 tonnes.

Managing risk amid uncertainties

Meanwhile, consumer demand reached 3.2 tonnes with an 8% y-o-y increase. Bar and coin demand rose by 25% to 1.6 tonnes while jewellery consumption fell by 5% to 1.6 tonnes.

“Demand in Singapore reflects the general trend as many institutions recognize gold as a strategic asset to manage risk and diversify their portfolios in times of economic uncertainty and political upheaval,” says Shaokai Fan, head of Asia-Pacific (ex-China) and global head of central banks at WGC.

Global gold investment remained resilient during the quarter, marginally higher y-o-y at 254 tonnes, concealing divergent demand trends. Bar and coin investment decreased 5% to 261 tonnes due to a sharp decline in demand for gold coins.

Strong retail investment in Asia was counterbalanced by lower levels of net demand in Europe and North America, where profit-taking surged in some markets.

Global gold ETFs saw minor outflows of 7 tonnes in Q2. Asian growth continued, sizeable European outflows in April turned into nascent inflows in May and June, and North American outflows slowed significantly compared to the previous quarter.

Jewellery, technology drive demand

Record high prices drove down jewellery demand by 19% year-on-year in Q2, but H1 demand remains resilient compared to the same period last year, thanks to a stronger-than-expected first quarter.

In addition, demand for gold in technology continued to increase, jumping 11% year- on-year driven primarily by the AI boom in the electronics sector which saw an increase of 14% year-on-year.

Total gold supply rose 4% from a year ago, with mine production increasing to 929 tonnes. Recycled gold volumes increased 4% y-o-y, marking the highest second quarter since 2012.

Louise Street, senior markets analyst at WGC, comments: “Looking ahead, the question is: what will be the catalyst to keep gold front and centre in investment strategies? With a long-awaited rate cut from the US Fed on the horizon, inflows into gold ETFs have increased thanks to renewed interest from Western investors.

“A sustained revival of investment from this group could change demand dynamics in the second half of 2024. In India, the recently announced import duty cut should create positive conditions for gold demand, where high prices have hampered consumer buying.

“While there are potential headwinds for gold ahead, there are also changes taking place in the global market that should support and elevate gold demand.”

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