OSE Derivatives

The World Gold Council’s Q2 2024 Gold Demand Trends report reveals that total global gold demand increased 4% year-on-year to 1,258t, marking the strongest Q2 in our data series1. Total demand was supported by healthy over-the-counter (OTC2) transactions, up a notable 53% year-on-year at 329t.

Increased OTC demand, continued buying from central banks, and a slowdown in ETF outflows drove record-high gold prices in Q2. The gold price averaged US$2,338/oz, 18% higher year-on-year, reaching a record of US$2,427/oz during the quarter.

Central banks and official institutions increased global gold holdings by 183t, slowing down from the previous quarter but still reflecting a 6% increase year-on-year. Our annual central bank survey confirmed that 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.

Global gold investment remained resilient, marginally higher year-on-year at 254t, concealing divergent demand trends. Bar and coin investment decreased 5% to 261t in Q2, 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 7t during the quarter. Asian growth continued, sizable European outflows in April turned into nascent inflows in May and June, and North American outflows slowed significantly compared to the previous quarter.

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% year-on-year, with mine production increasing to 929t. Recycled gold volumes increased 4% compared to the same quarter in 2023, marking the highest second quarter since 2012.

Louise Street, Senior Markets Analyst at the World Gold Council, commented:

“The rising and record-breaking gold price has made headlines as strong demand from central banks and the OTC market supported prices, which has been a consistent trend throughout the year. The OTC market has seen continued appetite for gold from institutional and high-net-worth investors, as well as family offices, as they turn to gold for portfolio diversification. On the other hand, demand from jewellery tumbled last quarter as prices continued to hit highs, which also tempted some retail investors to take profit.

“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.”

The Gold Demand Trends Q2 2024 report, which includes comprehensive data provided by Metals Focus, can be viewed here.

Footnotes

¹ Gold demand excluding OTC in Q2 was down 6% y/y to 929t as a sharp decline in jewellery consumption outweighed mild gains in all other sectors.

² Over-the-counter (OTC) transactions (also referred to as ‘off exchange’ trading) take place directly between two parties, unlike exchange trading which is conducted via an exchange.