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Wednesday, May 29, 2024
Mugglehead Magazine
Alternative investment news based in Vancouver, B.C.


Global gold demand dips 5% to Q1 2024 due to ETF action

Global gold ETF holdings declined by 114 tonnes, with Europe and North America experiencing quarterly outflows

Global gold demand dips 5% to Q1 2024 due to ETF action
Image from Sabrianna via Unsplash.

Gold demand in the first quarter of 2024 dipped 5 per cent year over year to 1,102 tonnes, due to continued outflows from exchange-traded funds (ETF), according to research from the World Gold Council (WGC).

Released on Tuesday, it excluded over the counter demand by investors, where total gold demand increased 3 per cent year over year to 1,238 tonnes, which was the strongest Q1 since 2016.

Central banks continued their strong pace of gold buying in Q1, adding a net total of 290 tonnes to official holdings, although only some of this is currently reflected in IMF data. Bar and coin demand remained steady at 312 tonnes, showing a 3 per cent year-over-year increase.

Global gold ETF holdings declined by 114 tonnes, with Europe and North America experiencing quarterly outflows, partially offset by inflows into Asian-listed products.

Funds listed in the U.S. experienced a positive shift late in the quarter. The jewellery sector remained robust amidst a price rally. Global jewellery consumption dropped slightly, by 2 per cent year over year to 479 tonnes.

Jewellery fabrication increased by 1 per cent year over year to 535 tonnes, leading to an inventory build of 56 tonnes during the quarter. The technology sector’s demand for gold rose 10 per cent year over year, fuelled by a surge in demand from the electronics sector amid the AI boom.

The WGC projects that gold will yield a much stronger return in 2024 than it initially forecasted in its 2024 Gold Outlook. This is driven by ongoing buying from EM central banks and retail investment, despite the absence of visible physical Western investment.

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Price of price makes record highs prior to correction

The report indicates that the recent significant price increase is likely to stimulate a rise in recycling supply and decrease jewellery demand. However, these could potentially be mitigated by high geopolitical risks and the quasi-investment role of jewellery in certain countries.

Furthermore, mine supply is poised to set new records due to expansions in North America and low levels of hedging, with producer margins remaining near record highs.

The gold price made successive record highs throughout March and into April before experiencing a recent correction, which the council views as a healthy development. It believes any stabilization in the gold price in the coming months will likely attract price-sensitive buyers back into the market.

Furthermore, there remains upside potential in the gold ETF space, particularly as the shift from gold to positive yielding bonds in Europe may taper off with impending European Central Bank (ECB) interest rate cuts.

The WGC projects that bar and coin demand will stay strong, largely due to China. It started the year with its strongest quarter since 2017. Improvements in household finances, ongoing central bank purchases, weak domestic equity and property markets, and currency instability all contribute to sustaining robust demand levels in China. In contrast, Indian bar and coin demand has fallen short of expectations based on economic growth, although it is anticipated to surpass last year’s levels due to expected better monsoon conditions and strong economic performance.

In Europe, ETF demand remains notably absent, partly because institutions that shifted from holding negative yielding bonds to gold a few years ago are now moving back into positive yielding bonds. This trend may face challenges when policy rates decrease.

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Total gold supply increased 4% year over year

Meanwhile, in Q1, 2024, the total gold supply increased 4 per cent year over year, driven by strong mine production and in crease in recycling.

Specifically, mine production reached an all-time high for a first quarter at 893 tonnes, marking a 4 per cent increase from the previous record of 855 tonnes set in Q1 2023. Recycling also rose by 12 per cent year over year to 351 tonnes.

However, the total supply could have been even higher if not for a modest reduction in the aggregate hedge book, although this data may see substantial revisions once mining companies release their quarterly reports.

On a quarter-over-quarter basis, production fell by 5 per cent, primarily due to seasonal fluctuations. Open pit and alluvial mining operations typically scale back or halt during the coldest parts of the year, particularly in China, Russia, and other Central Asian countries.

Similarly, South Africa’s gold mining industry often sees reduced output over the Christmas and New Year period due to long summer holidays. Notable production increases in the first quarter, based on data available at the time of publication, occurred in several countries.

Seasonal fluctuations also caused a 5 per cent quarter-over-quarter decrease in global gold mine production, with significant cuts during the coldest parts of the year in countries like China, Russia, and Central Asia, and due to long summer holidays in South Africa. However, year over year, mine production increased by 4 per cent, with several countries reporting notable increases.

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Canada spearheads high growth in gold sector in Q1

The biggest players seem to be in North America, with Canada leading the way.

In Canada, high growth at Agnico Eagle Mines Limited (NYSE: AEM) (TSX: AEM) Meadowbank and Alamos Gold Inc. (TSX: AGI) (NYSE: AGI) Magino mines drove a 16 per cent increase in production. Meanwhile, in Ghana, the Ahafo mine’s recovery boosted production by 15 per cent, and in Indonesia, higher outputs at the Grasberg, Batu Hijau, and Tujuh Bukit mines contributed to a 14 per cent increase.

China also reported production increases of 5 per cent. It reported early quarter growth from mines in key provinces like Shandong and Henan.

Conversely, various challenges caused production declines in some countries. In Bolivia, issues at Amayapampa and a decrease in artisanal mining reduced production by 38 per cent. In Mexico, reduced guidance at several mines, including Newmont Corporation‘s (NYSE: NEM) (TSX: NGT) Peñasquito mine, led to a 19 per cent drop.

Regionally, Africa and Asia recorded the largest increases in mine production, each up by 7 per cent year over year, driven by high volumes from Ghana and China—such as the Valentine Mine in Newfoundland, presently owned by mid-tier gold operator, Calibre Mining (TSX: CXB) (OTCQX: CXBMF).

North America and Central and South America operations also registered increases, with Canada and Brazil driving higher production.

Noteworthy companies and strong juniors operating in North America include U.S. Gold Corp (NASDAQ: USAU) with operations in Nevada, Idaho and Wyoming. Also, Seabridge Gold (TSX: SEA) (NYSE: SEA), which operates projects in British Columbia and Nevada and Timberline Resources Corporation (TSXV: TIM) (OTCQB: TMBRF) which is focused on its Lookout Mountain project in Nevada.


Calibre Mining and U.S. Gold Corp both sponsor Mugglehead news coverage


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