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Gold Demand Trends in Q1 2024: ETF Outflows Offset Central Bank and OTC Buying

During the first quarter of 2024, gold demand, excluding over-the-counter (OTC) transactions, experienced a 5% year-on-year decline to 1,102 tonnes. This dip was primarily driven by continued outflows from exchange-traded funds (ETFs). However, when inclusive of significant OTC buying by investors, total gold demand saw a 3% year-on-year increase to 1,238 tonnes, marking the strongest first quarter performance since 2016.

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Central banks maintained their robust pace of gold acquisitions, adding 290 tonnes (net) to official holdings during Q1. Notably, only a portion of these acquisitions is currently reflected in International Monetary Fund (IMF) data.

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Demand for gold bars and coins remained steady, matching the previous quarter at 312 tonnes, resulting in a 3% year-on-year increase.

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Global gold ETF holdings experienced a decline of 114 tonnes during the quarter. Both Europe and North America witnessed outflows, partially offset by inflows into Asian-listed products. Towards the end of the quarter, US-listed funds experienced a positive shift.

Despite the price rally, the jewellery sector demonstrated resilience, with global jewellery consumption registering a mere 2% year-on-year decline to 479 tonnes. Jewellery fabrication increased by 1% year-on-year to 535 tonnes, leading to an inventory build of 56 tonnes during the quarter.

Technology demand for gold rebounded by 10% year-on-year, driven by increased demand in the electronics sector amid the artificial intelligence (AI) boom.

Key Highlights:

The LBMA (PM) gold price averaged a record US$2,070 per ounce in Q1, marking a 10% increase year-on-year and a 5% increase quarter-on-quarter. Gold prices reached new highs in March, closing the quarter at US$2,214 per ounce.

Q1 witnessed significant OTC demand, which contributed to the pace and scale of the price rise. CME net managed money positions, serving as a proxy for OTC buying by investors, rose by 91 tonnes in Q1.

Mine production increased by 4% year-on-year to 893 tonnes, setting a record for the first quarter in the data series. Recycling also responded to higher prices, surging by 12% year-on-year to 351 tonnes. This marks the highest quarter of recycling supply since Q3 2020, driven by increased gold prices and responses to the pandemic.

Western and Eastern investors exhibited contrasting behavior. While Western gold buying remained robust, it was accompanied by healthy levels of profit-taking. In contrast, Eastern markets witnessed strong buying amid the price surge.

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