Gold demand in the first quarter of the year showcased notable dynamics, driven by various factors including over-the-counter (OTC) buying, central bank acquisitions, and shifting patterns in regional investment preferences.
According to data from the World Gold Council, when factoring in OTC buying, gold demand recorded its strongest first quarter performance since 2016, reaching 1,238 tons, a 3% increase year-on-year. Excluding OTC transactions, demand decreased by 5% to 1,102 tons due to significant outflows from ETFs. The rise in OTC buying was estimated based on the increase in the average gold price, which surged by 10% to a record $2,070 per ounce during the quarter.
Central banks continued to be major drivers of gold demand, adding a net 290 tons to reserves in Q1. Notable buyers included China, Turkey, and India. Coin and bar demand remained steady at 312 tons, with strong growth observed in China (up 68% year-on-year) and India (up 19% year-on-year), contrasting with modest declines in U.S. and European markets.
However, gold jewelry demand softened by 2% to 479 tons, impacted by higher prices. Despite this decline, demand remained above the historic first-quarter average. Additionally, gold ETFs experienced continued outflows, particularly in North America and Europe, with holdings dropping by 114 tons in Q1. Asian-based ETFs, notably in China, saw modest growth.
The tech sector saw a recovery in gold demand, increasing by 10% year-on-year, driven by a 16% rise in demand from the electronics industry.
Looking ahead, the World Gold Council anticipates a robust outlook for gold in 2024, citing continued central bank demand and sustained retail investment support despite subdued physical investment in Western markets. This positive sentiment underscores expectations for gold to remain resilient and potentially experience stronger performance than previously forecasted.
The movement of gold from West to East was evident in coin and bar demand trends, reflecting contrasting investor behaviors and preferences across regions. This shift highlights the global nature of gold demand and the diverse factors influencing its market dynamics.
