Gold Prices Hit Record High In Q2 2024 Driven By Tech And AI. A Dive Into The Dynamics

The World Gold Council's Q2 2024 Gold Demand Trends report shows a 4% year-on-year increase in global gold demand, reaching 1,258 tonnes. This marks the strongest second quarter in their data series. Over-the-counter (OTC) transactions significantly contributed to this rise, with a notable 53% increase year-on-year, totalling 329 tonnes.

Central banks and official institutions added 183 tonnes to global gold holdings, reflecting a 6% year-on-year increase despite a slowdown from the previous quarter. The annual central bank survey indicates that reserve managers expect gold allocations to continue rising over the next year due to economic and geopolitical complexities.

Gold prices averaged US$2,338 per ounce in Q2, an 18% increase from last year. The price peaked at US$2,427 per ounce during the quarter. These record-high prices were driven by increased OTC demand, continued central bank purchases, and reduced ETF outflows.

Global gold investment remained stable at 254 tonnes, slightly higher than last year. However, bar and coin investment fell by 5% to 261 tonnes due to a sharp decline in gold coin demand. Strong retail investment in Asia was offset by lower net demand in Europe and North America.

The high gold prices led to a 19% year-on-year drop in jewellery demand for Q2. Despite this decline, H1 jewellery demand remains resilient compared to last year due to a stronger first quarter. In technology, gold demand rose by 11%, driven by a 14% increase in the electronics sector due to the AI boom.

Global gold ETFs experienced minor outflows of 7 tonnes during Q2. While Asian growth continued, European outflows in April turned into inflows by May and June. North American outflows slowed significantly compared to the previous quarter.

Total gold supply increased by 4% year-on-year, with mine production reaching 929 tonnes. Recycled gold volumes also rose by 4%, marking the highest second quarter since 2012.

Andrew Naylor from the World Gold Council noted that rising gold prices have made headlines recently due to strong central bank and OTC market demand. He stated: "Recently, the rising and record-breaking gold price has made headlines, driven by strong demand from central banks and the OTC market which propped up demand globally."

Naylor highlighted that high international prices have impacted consumer demand negatively: "However, the record high international prices have impacted consumer demand with global bar and coin demand falling 5% year-on-year and jewellery tumbling down 19%." He also mentioned that UAE's investment demand dropped by 5%, aligning with global trends, while jewellery demand decreased by 13% year-on-year.

Looking ahead, Naylor suggested that economic conditions and investor sentiment will be crucial for regional demand dynamics in H2 of 2024. He noted that high prices might remain a challenge for gold demand but added that geopolitical instability and potential interest rate cuts could positively influence it.