Going for gold — demand for the precious metal reaches highest Q1 level in eight years

The gold price has been a blockbuster commodity story in 2024, recently surging to record highs of more than $2,400 an ounce. 

Central bank buying, especially from emerging markets, has been a key driver of this trend and shows no sign of abating, according to the latest quarterly “Gold Demands Trend” produced by the World Gold Council (WGC). 

“Q1 saw no let-up in the pace of central bank gold buying: 290 tonnes (net) was added to official holdings,” the WGC said. “Inclusive of sizeable OTC buying by investors, total gold demand increased 3% y/y to 1,238 tonnes – the strongest first quarter since 2016.” 

Gold’s allure to central banks stems from a range of factors, including the precious metal’s safe haven status amid rising geopolitical tensions and global economic uncertainties. Geopolitics have also triggered a shift from the US dollar as a reserve currency among major emerging market central banks. 

Gold’s price rose 10% over the course of the quarter, but that did not thwart central bank appetite – though it could as the year progresses.

“The multiyear trend of net central bank buying appears established, but there may well be some central banks willing to wait on the sidelines in response to the recent price surge. Equally, opportunistic sellers may be more likely to get drawn out with the stellar rise in prices so far this year,” the report noted. 

Other trends noted by the WGC include a 10% rise in technological demand for gold as the rise of AI has boosted electronics demand. Technology overall is the smallest component of gold demand but it is clearly an area to watch. 

But as an investment asset, demand in developed economies remains relatively cool. This may help to explain the disconnect outside South Africa between the price of gold and gold equities on the global stage. 

Read more in Daily Maverick: Shimmer of hope — what’s behind another gold rush in South Africa

“Global gold ETF holdings fell by 114 tonnes. Europe and North America both saw quarterly outflows,” the report said. 

Major North American-listed gold producers have generally not seen gold’s record run reflected in their share prices, a trend that is partly explained by scepticism in advanced economies that prices can remain at recent lofty levels. 

South African gold producers such as Harmony Gold, by contrast, have seen their share prices soar in the year-to-date, underscoring the faith domestic investors have in the precious metal and their relative comfort with and understanding of the industry, which is woven into the country’s historic fabric. 

Meanwhile, mining companies are producing gold at a record rate. 

The report said gold mine production rose 4% year-on-year in Q1 to 893 tonnes – another Q1 record in the WGC’s data series. With these prices, companies are clearly going for gold. DM