Annual gold demand dropped 4,448 tonnes in 2023, a decline of 5 per cent from the year previous, according to the World Gold Council’s Gold Demand Trends released late January.
In 2022, the central bank continued its buying streak at a blistering rate according to the report, with demand reaching 1,037t, making it the second-highest on record, down just 45t from the previous year. In contrast to robust OTC and central bank demand, ETF outflows continued in 2023, as they lost 244t in a third consecutive year of decline, with outflows in Europe dominating the picture.
Turning to bar and coin investment, subdued demand saw a 3 per cent decline as strength in some markets offset weakness elsewhere. European demand continued to plummet, with a year-on-year decrease of 59 per cent. However, this decline found compensation in a strong post-COVID recovery in China, where annual demand surged by 28 per cent to 280t, alongside notable increases in India with 185t, Turkey with 160t, and the US with 113t.
“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 markets analyst at the World Gold Council.
Street anticipates that in 2024, besides monetary policy, geopolitical uncertainty will significantly influence the gold market. Ongoing conflicts, trade tensions, and more than 60 elections worldwide are expected to drive investors towards gold due to its well-established reputation as a safe-haven asset.
Central bank buying will remain strong in 2024
In 2023, mine production, including companies Newmont Corporation (NYSE: NEM) (TSX: NGT) Calibre Mining Corp (TSX: CXB) (OTCQX: CXBMF) and Barrick Gold Corporation (TSX: ABX) (NYSE: GOLD), exhibited minimal growth, increasing by 1 per cent.
Recycling, on the other hand, saw a 9 per cent rise, which was lower than anticipated, considering the high gold price, and this increase drove total supply up by 3 per cent.
Central banks often reference gold’s performance during crises as a rationale for their purchases, according to Street. This implies that demand from central banks will likely remain strong in the current year, potentially compensating for a potential decrease in consumer demand caused by higher gold prices and a slowdown in economic growth.
The global jewellery market exhibited remarkable resilience amidst record-high prices, with demand inching up by 3 tonnes year-on-year. China played a pivotal role, experiencing a 17 per cent increase in gold demand as it emerged from COVID-19 lockdowns, effectively offsetting a 9 per cent decrease in India.
A decline in gold demand can have a substantial impact on gold miners and the broader gold mining industry.
When gold demand diminishes, it typically leads to an oversupply of the precious metal in the market, driving down the price. Lower gold prices influence the profitability of gold mining operations, reducing revenue generated from sales from mined gold.
This could also lead to companies facing production scale-backs, delayed exploration projects, or even mine closures. Additionally it could result in job cuts, reduced investments in the sector, and a general economic downturn in regions heavily reliant on gold mining.
At the time of writing, gold prices are still sky high at USD$2,024.76.
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