Gold demand to hit record with central-bank buying and Federal Reserve rate cuts, WGC says
- The precious metal rallied 13 per cent last year, touching a record in early December, on the back of economic and political uncertainty, geopolitical tensions
- Central-bank buying to top 500 tons this year, after net purchases reached 1,037 tons in 2023, the WGC said
Total gold demand hit a record last year and is expected to rise again in 2024 as the Federal Reserve moves towards cutting interest rates, potentially aiding prices, according to the World Gold Council (WGC).
Overall consumption expanded about 3 per cent to 4,899 tons last year, supported by strong demand in the opaque over-the-counter (OTC) market, as well as from sustained central-bank buying, according to the WGC’s full-year report. That’s the highest total figure in data going back to 2010.
“The landscape is appropriate for emerging central banks to continue to be net buyers,” Joseph Cavatoni, chief market strategist at the WGC, said in an interview. The council sees a strong case for record buying by countries such as China and Poland, he said.
The comprehensive demand figure includes bullion for investment, jewellery, coins, central-bank buying, exchange-traded funds (ETFs) and OTC activity. In that latter market, participants including sovereign funds, high net-worth individuals and hedge funds invest in gold bars, Cavatoni said.
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The precious metal rallied 13 per cent last year, touching a record in early December, on the back of economic and political uncertainty, geopolitical tensions, and expectations that the US central bank is poised to start easing policy after an aggressive hiking campaign to tame inflation. Investors typically want to own gold in a rate-cutting cycle as it benefits from lower Treasury yields and a weaker dollar.
Annual demand growth in the OTC market hit 753 per cent last year, the most since at least 2011, WGC data showed. Investors are expected to continue accumulating gold at an accelerated pace this year, largely driven by the Federal Reserve’s expected pivot towards easing, according to Cavatoni.