Analysis of gold demand trends for the first quarter of 2024: conclusions and prospects

The global gold market saw a number of notable developments in Q1 2024 that impacted investor sentiment and market dynamics. According to the latest report from the World Gold Council, gold demand, excluding OTC transactions, declined slightly, by 5%, year-on-year to 1,102 tons. This decline is mainly due to continued outflows from exchange traded funds (ETFs). However, when significant OTC buying is taken into account, total gold demand rose 3% year-on-year to 1,238 tons, the highest first-quarter total since 2016.

Central banks kept up their gold buying activity, adding 290 tons to their official reserves during the first quarter. While IMF data does not yet fully capture the scale of these acquisitions, it underscores the continued attractiveness of gold as a strategic asset for central banks around the world. This sustained trend, led predominantly by emerging market central banks, underscores the continued appeal of gold as a reliable reserve asset in the face of economic uncertainty. At the same time, demand for gold bars and coins remained steady and in line with the previous quarter at 312 tons, with a modest 3% year-on-year increase. Sustained demand was supported by favorable gold price performance, which exceeded the 5-year average by 17%.

The strong demand was supported by favorable gold price performance, which exceeded the 5-year average by 17%.

Interestingly, the trend in global demand for bullion and coins revealed a divergence between Western and Eastern markets. Traditionally, eastern investors are more price sensitive and wait for favorable times to enter the market. However, the first quarter saw a departure from this trend: Asia and the Middle East saw a significant increase in investment demand accompanied by subdued profit taking activity. In contrast, investors in the US and Europe took advantage of record high gold prices by leveraging for profit, thereby offsetting strong demand for physical gold.

The use of gold in the face of market volatility

The Q1 2024 gold demand picture underscores the continued attractiveness of gold as a strategic asset class. In the face of escalating geopolitical tensions and economic instability, investors can capitalize on gold's intrinsic value as a hedge against currency devaluation and inflation. Continued purchases of gold by central banks further confirm its role as a reliable store of value and a means of portfolio diversification. Given the current market dynamics, investors should consider allocating a portion of their portfolio to physical gold, including gold investment coins, to mitigate risk and preserve wealth in the face of global volatility.