According to the World Gold Council, the total demand for gold reached an all-time high in the previous year and is anticipated to increase once more in 2024. This expected rise is attributed to the Federal Reserve’s plan to decrease interest rates, which could potentially benefit gold prices.
In the previous year, overall consumption increased by approximately 3 percent, reaching a total of 4,899 tons. This growth was primarily due to high demand in the opaque over-the-counter market and consistent purchases made by central banks. This is the highest recorded consumption level since 2010, according to the full-year report from the WGC.
Joseph Cavatoni, the chief market strategist at the WGC, stated in an interview that the current environment is suitable for central banks that are in the early stages of development to maintain their position as net buyers. According to Cavatoni, the council believes that countries like China and Poland have a compelling reason to engage in significant purchasing activities.
The overall demand calculation incorporates various forms of gold, such as investment bullion, jewelry, coins, purchases by central banks, exchange-traded funds, and over-the-counter transactions. In the latter category, individuals and funds with significant financial resources, including sovereign funds, wealthy individuals, and hedge funds, invest in gold bars, according to Cavatoni.
Last year, the valuable metal experienced a 13 percent increase in value, reaching a new high in December. This surge was influenced by uncertainties in the economy and politics, as well as geopolitical tensions. Additionally, it was believed that the US central bank would begin to reduce interest rates after implementing a series of increases to control inflation.
In times of interest rate cuts, investors often choose to invest in gold due to its ability to profit from lower Treasury yields and a decline in the value of the dollar.
According to data from the WGC, the growth in demand for Over-the-Counter (OTC) market last year reached 753 percent, which is the highest since 2011. Cavatoni states that investors are expected to continue buying gold at a faster rate this year, largely due to the Federal Reserve’s plans to ease monetary policies.
According to the report from the WGC, central banks continued to buy gold at a very fast pace. They purchased a net total of 1,037 tons last year, which was just 45 tons less than the record set in 2022. The WGC predicts that central banks will buy over 500 tons of gold this year.
According to Cavatoni, the anticipated increase in over-the-counter purchases and central bank acquisitions will serve as a significant opposing force to the decline in exchange-traded funds. This will lead to a potential increase in prices, suggesting that gold could reach $2,200 per ounce or even higher. Spot gold reached its peak at $2,135.39 in December.
According to the WGC, the demand for jewelry could face challenges this year due to economic downturns and rising prices. The WGC estimates that the consumption of jewelry from this industry in 2023 was 2,093 tons.
India, the second-largest consumer, may provide some optimism as demand from this Asian country is predicted to recover to a range of 800 to 900 tons over the next two years. This comes after a decline to 748 tons in 2023.
According to P.R. Somasundaram, the regional CEO at the council in India, the economy’s growth has contributed to a rise in incomes, which has supported the rebound. Despite a significant increase in prices, sales have remained stable in recent years.
The demand for gold jewelry in China is expected to stay consistent as people try to protect the value of their assets due to a weakening currency and uncertain economic situation. However, the World Gold Council predicts a decrease in China’s economic growth, which might lead to households having less money to spend on buying gold bars, coins, and jewelry.
