The World Gold Council (WGC) released a landmark report this week revealing that total global gold demand surged by 5% year-over-year (y/y) in the third quarter of 2024, reaching a record 1,313 tonnes (t). This increase, encompassing both over-the-counter (OTC) investments and Exchange-Traded Funds (ETFs), pushed the total value of gold demand beyond $100 billion for the first time in a single quarter. With a series of record-breaking highs in gold prices, the WGC attributed this demand boost to factors like ETF inflows, strong industrial use, and notable contributions from central bank acquisitions.
ETF Inflows and OTC Investments Fuel Record Demand
According to the World Gold Council, ETF inflows were a major catalyst behind the increase in total demand, as holdings grew by 95t, marking the first positive net inflow since Q1 2022. The shift contrasts sharply with the substantial outflows of -139t in Q3 of 2023, indicating a revived investor appetite for gold as an asset. The WGC notes that geopolitical instability, portfolio diversification, and lower interest rates have been pivotal drivers for this inflow, reflecting a surge in OTC investment, which nearly doubled to 137t year-over-year.
“The inflows across global ETFs represent a significant swing in investor sentiment,” the World Gold Council emphasized in the report, “reinforcing gold’s role as a favored asset class during economic uncertainty.”
Gold Jewellery and Coin Demand Decline
Despite the global uptick in gold demand, traditional consumer-driven sectors like jewelry and bar and coin investments experienced challenges. Global demand for gold jewelry fell by 12% y/y to 459t, with consumers grappling with historically high prices. However, the WGC highlighted that the decline in volume did not necessarily indicate reduced spending; rather, the value of jewelry demand rose by 13% y/y, exceeding $36 billion, as consumers opted for higher-value pieces.
India is a Bright Spot
According to the World Gold Council’s Q3 2024 report, India’s gold demand saw a notable rise, reaching 248.3 tonnes, an 18% increase over Q3 2023 (210.2 tonnes). The value of this demand surged by 53% to Rs. 1,65,380 crores, compared to Rs. 1,07,700 crores in Q3 2023.
Jewellery demand in Q3 2024 grew by 10% to 171.6 tonnes, worth Rs. 1,14,300 crores—a 43% increase from the Rs. 79,830 crores recorded last year. Investment demand also surged, up 41% to 76.7 tonnes, with its value rising by 83% to Rs. 51,080 crores, compared to Rs. 27,940 crores in Q3 2023.
Recycling of gold increased by 22% to 23.4 tonnes, while imports nearly doubled, reaching 360.2 tonnes, up 87% from 193 tonnes in Q3 2023. The Reserve Bank of India (RBI) maintained its buying momentum, adding 13 tonnes to its reserves, now totaling 854 tonnes, 6% higher than at the end of 2023.
Gold prices averaged $2,474.3 per ounce (or INR 66,614.1 per 10 grams) this quarter, a significant increase from Q3 2023. From January to September 2024, total gold demand reached 537 tonnes, marking an 8.6% increase over the same period in 2023.
The World Gold Council pointed to India as a major exception to the broader decline in jewelry demand. The country saw a sharp rise in gold buying, partly fueled by a reduction in gold import duties earlier this year. This policy shift lowered gold prices locally, prompting increased purchasing activity that helped counterbalance declining demand in markets such as China and the U.S.
Sachin Jain, Regional CEO, India, World Gold Council said:
“India’s gold demand in Q3 2024 witnessed an 18% year-on-year increase touching 248.3 tonnes. Sharp cut in gold import duties in July sparked a revival in jewellery demand, which posted its strongest third quarter since 2015 with 10% increase to 171.6 tonnes as compared to 155.7 tonnes in Q3’ 23. Momentum in consumer demand picked up sharply in late July and remained strong until the mid-September. There was sharp 41% increase in investment demand to 76.7 tonnes in comparison to 54.5 tonnes in Q3’ 23. Bar and coin demand in India jumped to its highest third quarter since 2012. Investor optimism and bullish price expectations were accelerated by the July duty-led price correction, which allowed many investors to enter the market.
The duty cut negated much of the rise in gold prices during August, which encouraged some early purchases for weddings scheduled over the next couple of quarters, as well as drawing out pent-up demand from previous quarters. Good monsoons also acted as a tailwind for robust growth in lower tier cities and rural areas.
There was robust rise of 87% in gold imports in Q3 2024 to 360.2 tonnes, compared to 193 tonnes in Q3’ 23. Flows of smuggled gold into India all but disappeared thanks to the duty cut. Moreover, India’s and recycling increased by 22% to 23.4 tonnes compared to 19.2 tonnes in the corresponding period last year. Another consequence of the duty cut was selling by gold loan companies, which auctioned some holdings following the rupee-denominated fall in gold in order to limit losses from the non-performing loans.
India’s gold demand remains solid in the fourth quarter due to Dhanteras and wedding demand, although with the continued rise in the gold price offsetting the impact of the duty cut, we may see an increased trend for investors to wait for price corrections as opportunities to add to their holdings. Nevertheless, India is on course for a very strong year, as y-t-d investment is already approaching the annual totals of the past four years. We expect full year gold demand to be in the range of 700-750 tonnes.”
Central Bank Purchases Slow but Stay Steady
The report from the World Gold Council noted a slowdown in central bank purchases in Q3, with net acquisitions amounting to 186t. Although this marked a decrease in the pace of buying, the year-to-date total of 694t remained on par with 2022 levels, underscoring the sustained interest from central banks in diversifying their reserves. This continuity in purchasing activity highlights central banks’ confidence in gold’s stability and resilience amidst fluctuating global currencies and economic volatility.
Central bank demand, although slower, reflects a strong foundation for gold as a reserve asset the WGC stated, with the data underscoring that central bank demand remains widespread.
Industrial Use of Gold Gains as Technology Sector Expands
Gold’s role in technology and industrial sectors grew significantly, with the World Gold Council reporting a 7% y/y increase in demand for industrial applications, totaling 83t. The electronics sector, which accounts for most technology demand, led this growth with a 9% y/y rise to 69t. This boost was driven by advancements in areas like artificial intelligence and high-end electronics, even as dental demand for gold continued its steady decline. According to the WGC, this trend reflects a broader expansion of gold use in technology, although the outlook remains cautious given the variable nature of global economic conditions.
Global Supply and Mine Production Set New Records
On the supply side, the World Gold Council report disclosed that total global supply rose by 5% y/y, achieving a record high for Q3. The rise was largely attributed to increased mine production, which set a new quarterly record, and an 11% y/y growth in recycled gold volumes. Although recycling volumes spiked in regions such as China, overall Western markets saw less activity, as distress selling has not yet materialized despite economic headwinds. With year-to-date supply up 3% to 3,762t, WGC projections suggest that mine production could achieve another record year by the end of 2024.
Price Highlights and the Road Ahead for 2024
The WGC also spotlighted gold prices, with the average price per ounce in Q3 up by 28% y/y, hitting a record high of $2,474. The sustained demand, coupled with declining global interest rates, geopolitical concerns, and steady institutional interest, suggests that prices may remain elevated in the near term.
In the year-end forecast, the World Gold Council projects a positive outlook. The Council expects that professional investment flows, combined with stable bar and coin demand, will likely offset a decrease in consumer jewelry purchases and a moderation in central bank buying. With supply expected to hit unprecedented levels by year’s end, the WGC anticipates that 2024 will close as a landmark year for the gold market.
WGC Report says ”Our expectation for a resumption of Western investment flows was realised in Q3, helping propel gold prices yet higher. Bar and coin investment set to remain solid as jewellery buying steps back amid high prices. Central bank buying, although slower, is on track for a strong year. Supply is on course for a record year after very strong third quarter mine production.”
The World Gold Council’s report showcases the extraordinary resilience of gold, with diverse sources of demand maintaining the metal’s relevance and value in uncertain times. The ETF resurgence, robust central bank buying, and industrial demand point to gold’s enduring appeal as a versatile asset. As global conditions continue to shift, the Council’s findings underscore the gold market’s robust fundamentals, setting the stage for continued strength through 2024 and beyond.
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