On Wednesday, the World Gold Council released an annual report that not only highlights the astonishing performance of the gold market in 2024 but also offers critical insights into the trends expected to shape the market in 2025.
The report unequivocally states that global gold demand will reach an impressive record of 4,974 tons in 2024, marking a 1.5% increase from 4,899 tons in 2023. Behind this remarkable figure lies a turbulent global economic landscape and a shift in investors’ sentiment towards goldThe primary drivers of this surge are substantial purchases by central banks and a notable increase in investment demandShaokai Fan, the global head of central bank business at the World Gold Council, remarked, “In 2024, amid intensifying geopolitical and economic uncertainties, global gold demand is set to hit new quarterly highs and annual total records.” This statement profoundly illustrates the macroeconomic backdrop contributing to the unprecedented rise in gold demand.
In today’s world, the escalation of geopolitical tensions, the rise of trade protectionism, and increasing uncertainties surrounding economic growth have all shaken the confidence of each country's central banks and investors in traditional assets, prompting a shift in focus towards gold—an asset renowned for its safe-haven characteristics
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Gold, being a scarce precious metal, offers relatively stable value, empowering it to effectively withstand risks of inflation and currency devaluation during tumultuous economic timesConsequently, it has emerged as the go-to choice for numerous investors.
On the central bank front, the report indicates that demand for gold remains “insatiable,” reaching a “significant milestone” with continued robust purchases for the third consecutive year, exceeding 1,000 tons to hit 1,045 tonsThis figure vividly underscores the high regard that various central banks have for goldIn an unstable global economic climate, increasing gold reserves not only bolsters financial stability for nations but also enhances their clout in international financial marketsAmid this central bank gold-buying surge, the National Bank of Poland emerged as the largest net buyer, augmenting its gold reserves by 90 tons in 2024. This move reflects Poland's response to the complex geopolitical landscape and economic risks in Europe, while simultaneously aiming to optimize its foreign exchange reserve structure, enhancing both the security and liquidity of its assets
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Following closely is the Central Bank of Turkey, which increased its gold reserves by 75 tons, becoming the second-largest net buyer among central banks.
As a country straddling both Europe and Asia, Turkey’s economic and political circumstances are influenced by a myriad of factors; therefore, increasing gold reserves plays a role in stabilizing its currency exchange rate and bolstering economic resilienceThe Reserve Bank of India ranks third, consistently acquiring gold every month except for DecemberAs one of the world’s largest consumers of gold, India's central bank’s sustained purchasing not only reflects the nation’s traditional affinity for gold but also illustrates its strategic approach to safeguarding economic security amid global economic unpredictabilities by enhancing gold reserves.
On the investment demand front, total gold investment in 2024 is anticipated to rise by 25% to 1,180 tons, reaching its highest level in four years, primarily fueled by gold-backed exchange-traded funds (ETFs). Gold ETFs, financial derivatives that track the spot price of gold, are lauded for their trading convenience and low costs, rendering them exceptionally popular among investors
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Especially in major gold-consuming countries like China and India, demand for gold investment continues to climb steadily with economic growth and rising levels of incomeThe robust demand in the Chinese and Indian markets has also led to a solid uptick in investments in gold bars and coinsThe cultural foundations and consumer habits surrounding gold are deeply entrenched in the societies of both countries; gold is not perceived merely as an investment tool but as a symbol of wealth and a means of legacyDuring economic instability, investors tend to favor gold markets to protect and augment their assets.
Nevertheless, while the overall demand for gold is on the rise, the jewelry sector has suffered due to soaring prices, with demand plummeting by 11% annually—the only segment to experience a declineThe World Gold Council indicates that consumer purchasing power, impacted by high prices and slow economic growth, could lead to a continued slump in gold jewelry demand this year
With escalating gold prices, the cost for consumers to purchase gold jewelry has significantly increased, while the slowdown in economic growth has also impacted consumer income levels—resulting in a downturn in market demand for gold jewelryFurthermore, evolving consumer preferences have diversified the demand for jewelry, with other materials becoming increasingly favored over traditional gold jewelry, further chipping away at gold's market share.
Looking ahead to 2025, the World Gold Council predicts that central banks will continue to be the principal driving force behind gold demand, with healthy investment demand expected to persist as wellThe report notes that central banks' motivation for purchasing often appears more strategical compared to other investorsOver the past fifteen years, central banks have sold relatively little, resulting in their responses to price fluctuations being more subdued—thereby acting as a crucial support for gold prices
The primary reason central banks increase gold reserves rests in ensuring national financial safety and stability, with investment decisions typically made based on long-term strategic considerations rather than short-term market volatilityThus, even when gold prices experience certain fluctuations, central banks are unlikely to hastily offload their reserves, providing a robust foundation for market stabilityLouise Street, a senior market analyst at the World Gold Council, indicated, “In 2025, we expect central banks to continue leading demand, with gold ETF investors likely to join in, especially if interest rates decline (despite substantial volatility).” As uncertainties surrounding the global economic landscape persist, the likelihood of central banks lowering interest rates is also increasing graduallyShould this occur, the opportunity cost of holding gold would decrease, attracting more investors into the gold market and further driving demand upwards.
In conclusion, gold demand is set to hit new heights in 2024, propelled by central bank purchases and investment needs