Q2 2024 Gold Demand Declines Amid Record Prices, Central Bank Buying Soars

Global gold demand in Q2 2024 saw a 6% year-on-year decline due to decreased jewelry consumption, while total demand, including OTC investments, rose by 4%. Central banks continued to bolster gold reserves, countering high gold prices that impacted consumer behavior, particularly in sensitive markets such as India.

Global gold demand in the second quarter of 2024, excluding over-the-counter (OTC) transactions, witnessed a 6% year-on-year decline, totaling 929 tonnes. This drop was primarily driven by a sharp fall in jewelry consumption, according to the latest report from the World Gold Council. However, when factoring in OTC investments, total gold demand rose by 4% to 1,258 tonnes, marking the highest Q2 figure since data collection began in 2000.

Record-high gold prices significantly impacted jewelry consumption, with volumes plunging 19% year-on-year to 391 tonnes, the lowest in four years. The report highlights a mixed scenario for the Indian market in Q2 2024, where overall gold demand showed a modest increase due to investments in OTC markets and central bank purchases. Nonetheless, India mirrored broader market trends influenced by fluctuating gold prices.

The decline in jewelry consumption reflects the impact of higher gold prices on consumer purchasing behavior, particularly in price-sensitive markets like India. Central banks remained major players in the gold market, with net gold buying increasing by 6% to 184 tonnes year-on-year. This rise is attributed to the need for portfolio protection and diversification amid economic volatility. In June alone, central banks reported net purchases of 12 tonnes, with significant contributions from the Central Bank of Uzbekistan and the Reserve Bank of India, each adding 9 tonnes to their reserves.

The Monetary Authority of Singapore was noted as the largest seller, offloading 12 tonnes in the same month. The LBMA (PM) gold price averaged a record USD 2,338 per ounce in Q2 2024, an 18% year-on-year increase and a 13% quarter-on-quarter rise. May saw gold prices peak at a new high of USD 2,427 per ounce, driving notable investment and production trends, with total gold supply growing by 4% to 1,258 tonnes.

Mine production reached a record 929 tonnes, while recycling supply hit the highest levels since 2012, reflecting the response to rising prices. OTC investment was a significant component of total gold demand in Q2, amounting to 329 tonnes. Alongside continued central bank buying, this contributed to record-high gold prices. Despite a minor 7-tonne decline in global gold ETF holdings in Q2, this was an improvement compared to a 21-tonne drop in the same period in 2023.

The decline in ETF holdings was followed by early outflows and nascent inflows later in the quarter. Retail bar and coin investment saw a 5% decline to 261 tonnes, mostly due to weakened demand from Western markets. Conversely, gold used in technology witnessed an 11% year-on-year increase, driven by the growth in artificial intelligence applications. Investment trends continued to show regional divergence. Eastern markets saw robust demand for bars, coins, and ETFs, while Western markets experienced marked declines. However, Western ETF investment flows have shown signs of recovery early in the third quarter of 2024.

Looking ahead, expectations suggest that revived Western investment flows could help balance out weaker consumer demand and potentially slower central bank buying compared to 2023.

(With inputs from agencies.)