VIDEO — Ronald-Peter Stoeferle: New All-time Highs in Store for Gold, Will Silver Follow?

Central banks lead gold demand

Central banks remained the largest drivers of gold demand in 2024. As a group, they made cumulative net purchases of 1,045 MT in 2024, with the fourth quarter alone accounting for 333 MT.

The National Bank of Poland led the upsurge, purchasing 90 MT of the yellow metal in 2024, while other emerging market central banks also contributed significantly to the overall total.

This heightened demand from central banks marks a continuous shift in the global monetary system, with central banks increasingly favoring gold as a hedge against currency volatility and geopolitical tensions.

2024 was the third year in a row in which central banks' gold purchases exceeded 1,000 MT, marking a notable increase compared to the pre-2022 average of 473 MT.

Despite questions about future demand, central banks are expected to maintain their purchasing momentum into 2025, particularly as geopolitical risks continue to influence policy decisions.

Investor demand supports gold ETF growth

Gold's appeal to individual investors also remained robust in 2024, particularly in gold ETFs.

Investment demand for the precious metal reached 1,180 MT for the year, a 25 percent increase from 2023, with ETFs drawing significant inflows, especially in the second half of the year. These inflows were driven by factors including lower interest rates, geopolitical instability and a strengthening gold price.

In contrast to the previous three years, during which gold ETFs experienced substantial outflows, 2024 saw near-stagnant holdings by the end of the year, showing a marked shift in investor sentiment.

Market participants increasingly turned to gold as a safe haven, and the US market in particular witnessed considerable ETF inflows, driven by the relative weakness of the US dollar and concerns over inflation.

Gold jewelry demand struggles as price climbs

While investment demand soared, the jewelry sector struggled in 2024, with global jewelry consumption falling by 11 percent to 1,877 MT. The significant gold price rise during the year led to lower volumes of gold jewelry being purchased, as consumers found it increasingly difficult to afford the yellow metal.

The weakness in jewelry demand was global, though India saw relatively smaller declines compared to China, which experienced a significant drop of 24 percent from 2023.

However, the value of gold jewelry consumption increased by 9 percent, reaching a record high of US$144 billion. This allowed jewelers to achieve higher sales figures, with a marked contrast between demand volume and value.

Technology and industrial demand increases

In the technology sector, demand for gold grew by 7 percent in 2024, which the WGC attributes largely to the increasing adoption of artificial intelligence (AI) infrastructure.

Gold used in electronics rose by 9 percent year-on-year, contributing to the technology sector's solid demand. Overall, total annual gold demand from the tech sector came to 326 MT.

While gold’s role in industrial applications is a smaller portion of overall demand, its usage in advanced technologies continues to grow, underlining its importance in cutting-edge sectors like AI, electronics and renewable energy.

Gold mine and recycling supply rise

Gold supply saw modest growth in 2024, rising by 1 percent to a record 4,974 MT, a new high for the data series. Both mine production and recycling were up compared to the prior year, with recycling climbing 11 percent.

The WGC states that the outlook for gold supply remains strong, with expectations for robust mine production and potential increases in recycling rates in the coming year.

The gold price reached an average of US$2,386 per ounce in 2024, a 23 percent increase from the previous year. In Q4, the average price peaked at US$2,663, contributing to a total value of US$111 billion for the quarter.

What's driving gold's record price highs?

The WGC's report comes as the gold price hits new records, and in an interview with the Investing News Network, Joe Cavatoni, senior market strategist, Americas, at the WGC, shed light on the metal's price drivers.

"I think many investors are seeing the benefits and the merits of having gold as a diversifying asset in their portfolio," he said. "I think they're understanding that the risk shocks you might see to risk assets will continue to be something that will develop over the next two to three months at a minimum as we start to hear and see policies unpacked."

Watch Cavatoni discuss the WGC's latest report.

Cavatoni also pointed to expectations of lower interest rates as a motivating force for gold.

"All of those factors are stacking up to continue to be a very strong performance driver for gold," he said.

Tariff uncertainty is also contributing to gold's movement. The US has placed additional tariffs on China, and although it's deferred tariffs on Canada and Mexico for the time being, much uncertainty remains.

In Cavatoni's opinion, it will be key for sector participants to tune out distractions.

"I think the key thing right now is that you can clearly see the benefits of gold in a portfolio that's diversified. You can see the benefits of having it as a component of your allocation mentality, and I think overall what I'd say is that clients, investors and those who understand the gold market need to understand there'll be a lot of noise," he noted.