Global gold demand drops 6% in Q2 2024 due to slump in jewelry consumption, OTC investment pushes the total to record high

Global gold demand in Q2 2024, excluding over-the-counter (OTC) transactions declined by 6% year-on-year to 929 tonnes, primarily due to a sharp fall in jewelry consumption, according to the latest report of the World Gold Council.

However, when including OTC investment, total gold demand increased by 4% YoY to 1,258 tonnes, marking the highest Q2 figure since data collection began in 2000. The record-high gold prices took a significant toll on jewelry consumption. Volumes fell 19% YoY to 391 tonnes, the lowest in four years.

The report reveals a mixed picture for the Indian market in the second quarter of 2024. While overall gold demand showed a modest increase due to investment in OTC markets and central bank purchases, India witnessed trends that reflect broader market shifts.

This decline reflects the impact of elevated gold prices on consumer purchasing behaviour, particularly in markets sensitive to price fluctuations, including India. Central banks continued to be significant players in the gold market, with net gold buying increasing by 6% YoY to 184 tonnes.

This rise is attributed to the need for portfolio protection and diversification in a volatile economic environment. In June alone, central banks reported net purchases of 12 tonnes, with key contributors including the Central Bank of Uzbekistan and the Reserve Bank of India, both adding 9 tonnes to their reserves.

The Monetary Authority of Singapore was noted as the largest seller, offloading 12 tonnes in the same month.

The LBMA (PM) gold price averaged a record $ 2,338 per ounce in Q2 2024, up 18% YoY and 13% QoQ. Gold prices peaked at a new high of $2,427 per ounce in May. This environment drove significant investment and production trends, with total gold supply growing by 4% YoY to 1,258 tonnes.

Mine production reached a record 929 tonnes for a second quarter, while recycling supply was the highest since 2012, reflecting the response to rising prices. OTC investment was a major component of the Q2 total gold demand, amounting to 329 tonnes. This, along with continued central bank buying, contributed to pushing gold prices to record highs during the quarter. Despite a minor 7-tonne decline in global gold ETF holdings in Q2, this was an improvement compared to the 21-tonne drop in Q2 2023.

The decline in ETF holdings was followed by early outflows and nascent inflows later in the quarter. Retail bar and coin investment experienced a 5% decline to 261 tonnes, mainly due to weakened demand from Western markets. Conversely, gold used in technology saw an 11% YoY increase, driven by the continued growth in artificial intelligence (AI) applications.

Investment trends continued to diverge regionally. Eastern markets exhibited robust demand for bars, coins, and ETFs, while Western markets saw marked declines. However, Western ETF investment flows have shown signs of recovery in early Q3 2024.

Looking ahead to the full year of 2024, it is expected that revived Western investment flows will help balance out weaker consumer demand, and potentially slower central bank buying, compared to 2023.