Today's Edition
Hosam Abdel Nabi (Abu Dhabi)
A report by the World Gold Council confirmed that central banks’ net purchases of gold in the first half of the year amounted to 483 tonnes, recording a 6% increase in the second quarter to 184 tonnes. This rise was driven by the need to protect and diversify portfolios.
Despite a slowdown in demand in Q2 compared to the previous quarter, it remained above longer-term levels, highlighting gold’s role as a hedging and diversification tool for central banks.
The report, “Gold Demand Trends Q2 2024,” suggests that various factors will support the gold market in the second half of the year. Renewed investment flows are expected to balance weak consumer demand and a slowdown in central bank gold purchases in 2024 compared to 2023. The recent reduction in customs duties in India is also expected to boost demand in this key market.
Gold reached record highs in the second quarter, driven by strong over-the-counter investments, continued central bank buying, and increased Western ETF inflows. However, high prices impacted jewellery consumption, with global demand for gold jewellery falling by 19% year-on-year (YoY) to 391 tonnes. China saw the largest decline due to high prices and a weak domestic economy.
Global gold ETFs experienced slight outflows in Q2 (-7 tonnes), with combined inflows in May and June (26 tonnes) nearly offsetting April’s 33 tonnes of outflows. Asian-listed funds continued to grow, while Western-listed funds saw a rebound in inflows during Q2.
The report also noted a 5% YoY decline in global bullion and coin investments to 261 tonnes, primarily due to weak demand in Western markets. Strong demand in Asia was offset by increased profit-taking and liquidation in Western markets.
Total gold supply in the second quarter rose by 4% YoY to 1,258 tonnes. Mine production increased by 2% to a record 929 tonnes in the first half, and recycling supply also rose, making it the highest for the second quarter since 2012. Gold prices stabilised in the second quarter and beyond, in line with overall demand.
Excluding OTC investments, gold demand in Q2 declined by 6% YoY to 929 tonnes, as a sharp decline in jewellery consumption outweighed slight gains in other sectors. Including OTC investments, total gold demand increased by 4% YoY to 1,258 tonnes, the highest level in the second quarter since 2000. The use of gold in technology increased by 11% YoY, driven by the ongoing trend in artificial intelligence.
The average price of gold in the London Bullion Market Association reached a record $2,338 per ounce in Q2, 18% higher YoY and 13% higher quarter-on-quarter. In May, gold prices hit a new record of $2,427 per ounce, indicating a recovery in Western investment flows in 2024 to balance weak consumer demand and slower central bank purchases compared to 2023.
