Adrian JohnsonTLDR: Global central banks increased their purchases of gold in 2023, buying 1,037 tons, just shy of the previous year’s record, according to the World Gold Council (WGC). The demand for gold by central banks is expected to continue due to economic uncertainties and geopolitical tensions, which have increased the appeal of safe-haven assets. The People’s Bank of China was the largest buyer of gold. Total gold demand, including over-the-counter markets, reached a record of 4,899 tons, driving up prices. The WGC expects continued support for gold demand in 2024 due to rate cuts and geopolitical uncertainties. Gold ETFs are expected to rebound, while central banks’ buying trend is likely to continue. However, consumer demand may slow due to elevated gold prices and declining economic growth.
Key Points:
- Global central banks purchased 1,037 tons of gold in 2023, just short of the previous year’s record.
- Central banks’ demand for gold is expected to continue due to economic uncertainties and geopolitical tensions.
- Total gold demand reached a record of 4,899 tons in 2023, driving up prices.
- Gold ETFs are expected to rebound, while central banks’ buying trend is likely to continue.
- Consumer demand may slow due to elevated gold prices and declining economic growth.
Global central banks continued to hoover up gold in 2023 and are expected to keep buying at impressive rates as economic uncertainties and geopolitical tensions spur a rush for safe-haven assets, according to the World Gold Council. Banks’ annual net purchases amounted to 1,037 tons last year, falling just 45 tons short of the previous year’s record of 1,082 tons, the industry group said in its latest report.
The buying spree–a testament to gold’s role as an inflation hedge and store of value in times of crisis–was led by People’s Bank of China, the largest single gold buyer. “Unwavering demand from central banks has been supportive of gold demand again this year and helped offset weakness in other areas of the market, keeping 2023 demand well above the ten-year moving average,” said Louise Street, senior market analyst at WGC.
Total demand for gold, including over-the-counter markets, reached a record of 4,899 tons last year, driving a rally in prices, according to the report. Gold prices averaged $1,940.54 a troy ounce in 2023, 8% higher than the prior year. Excluding OTC, demand stood at 4,448 tons, 5% below 2022 levels.
Global gold exchange-traded funds saw a third consecutive annual decline with holdings dropping by 244 tons, even though the pace of outflows slowed at year end, according to the WGC. Losses were more pronounced in Europe.
Meanwhile, bar and coin investments were down 3% last year to a total of 1,190 tons, with steep declines in Europe counterbalanced by a strong post-pandemic recovery in China. The jewelry market was instead surprisingly resilient despite record-high prices, as consumption held steady at 2,093 tons, the group said.
This year, rate cuts and geopolitical uncertainties amid trade tensions in the Middle East and over 60 elections taking place globally should keep supporting demand and encourage investors to turn to gold. Total investments in the precious metal are likely to be higher, but much of the demand could come from the less visible OTC segment, adding some uncertainty, the WGC said.
Gold ETFs are expected to see a turnaround by mid year supported by rate cuts and heightened geopolitical risks, while central banks’ buying trend is set to remain in place, even though a third consecutive year of around 1,000 tons of net purchases may be unlikely, according to the report.
“Central banks often cite gold’s performance in times of crisis as a reason to buy, which suggests demand from this sector will stay high this year and may help to offset a slowdown in consumer demand due to elevated gold prices and slowing economic growth,” Street said.
