World Gold Council: Record Q1 Gold Price Driven by Demand Growth

Watch the full interview with Cavatoni.

The WGC's report highlights various notable trends in gold demand during the first quarter of 2024.

Although demand excluding over-the-counter (OTC) purchases fell 5 percent year-on-year, demand including OTC buying came in at 1,238 metric tons (MT), the best first quarter since 2016.

Central banks continued to be strong buyers in Q1, adding a net 290 MT to their official holdings during the period.

However, investment demand excluding OTC transactions saw a notable decline of 28 percent year-on-year, totaling 199 MT. This drop was primarily driven by substantial outflows from gold exchange-traded funds (ETFs), which overshadowed modest growth in bar and coin demand. But as Cavatoni explained, ETFs don't tell the whole story.

“It's about 6 percent of the investment market worldwide. So while it gets a lot of attention and it's very easy to track the net flows in the ETF market, it's just a small element that people need to pay attention to,” he noted.

Global gold ETF holdings experienced a sharp decline of 114 MT during the quarter, amounting to a decrease of US$6 billion. Despite these large outflows, assets under management reached their highest level in nearly two years, coming in at US$222 billion, thanks to the robust performance of the gold price.

Bar and coin investment demand posted a modest 3 percent year-on-year increase, rising to 312 MT in Q1. This rise was driven by buoyant demand for small gold bars, particularly in Asia, which offset a slump in demand for gold coins. The WGC points to a divergence in investment behavior between western and eastern markets, with profit-taking by western investors contrasting with consistent investment demand in Asia.

“What's been playing out has been very clearly a lot of western investors anticipating and looking for that trend in terms of where rates are going to head and the dollar strength,” Cavatoni commented.

Looking at specific regions, European gold ETFs lagged in Q1, experiencing a 4 percent decline in holdings. North America saw the largest tonnage decline in ETF holdings, primarily in January and February, with modest inflows observed in March. Similarly, European-listed ETFs saw outflows driven by adjustments in monetary policy expectations and rallying stock markets. In contrast, Asian-listed funds continued to attract inflows for the fourth consecutive quarter, with China leading the increase amid a weakening local currency and poorly performing domestic equity markets.

China also witnessed a surge in bar and coin demand, reaching its highest quarterly total in over seven years.

On the supply side, mine production saw a 4 percent year-on-year increase in Q1 to reach 893 MT, setting a first quarter production record. Additionally, recycling responded to higher prices, surging by 12 percent year-on-year to 351 MT, marking the highest quarter of recycling supply since Q3 2020.