31 January, 2024

Central banks, OTC may offset softer demand elsewhere

In 2024 we expect:

  • Total investment (including OTC) likely to be higher in 2024 but, akin to the market behaviour last year, much of this demand could come from the less visible OTC segment – which adds a level of uncertainty. Early continued weakness in global gold ETFs is likely to see a turnaround by mid-year, aided by anticipated rate cuts and continued geopolitical risk. European ETF outflows are likely to continue until longer-maturity interest rates are on a firm path lower, but even here regional politics, alongside geopolitics, could shake things up. Bar and coin demand is likely to stay healthy and in line with the 10-year average, as Chinese and Indian demand strength offsets European weakness
  • Central banks to keep buying at an impressive rate, likely in excess of the pre-2022 annual average of around 500t. They almost matched their 2022 total last year and we believe that a longer-term strategy is at play here and err on being more open-minded to another solid year of buying, albeit somewhat lower than this year
  • Jewellery demand may struggle to remain lofty, as economic slowdowns and high gold prices start to bite. However, should inflation drop significantly consumers might start to feel wealthier in real terms, which could mitigate some of the drop in demand. Technology demand is expected to benefit from strong positive guidance on semiconductors and from AI fever
  • Total supply to rise with planned expansions and higher-grades taking primary production to new highs, although a downside risk from disruptions remains a factor, as always. Recycling is expected to rise, but not materially, as an economic recovery helped by stimulus measures in China could stymie overall recycling activity there. Elsewhere, economic resilience and a possible geopolitical premium should help contain volumes. This status quo is on somewhat thin ice, however, as many economies are set to slow further. In addition, the bar to recycle, given elevated geopolitical tensions, is likely higher even in the face of high prices.

Full year outlook

2023 provided some positive surprises to our last full-year outlook: central banks almost repeated their 2022 feat; jewellery and retail investment stayed lofty against the odds, and recycling was muted. On the flipside, ETFs failed to shake off persistent negativity. The net outcome of a double-digit gold price return (USD) suggests that hidden within the opaque OTC and Other category was some healthy demand from investors. The main themes underlying these developments were the avoidance of a US recession, continued weakness and asset volatility in China, as well as no let-up in global geopolitical tension.


Chart 2: Economic and geopolitical scenario expected to be investment-positive overall in 2024*

Economic and geopolitical scenario expected to be investment-positive overall in 2024*

Expected change in annual gold demand and supply, tonnage, 2024 v 2023

Economic and geopolitical scenario expected to be investment-positive overall in 2024*
Expected change in annual gold demand and supply, tonnage, 2024 v 2023
* Data to 31 December 2023. Fabrication combines global jewellery and technology demand. Investment includes ETFs, bar and coin and OTC demand. Supply includes mine production and recycling. We have omitted hedging and assume it to be unchanged. Source: World Gold Council

Sources: World Gold Council; Disclaimer

* Data to 31 December 2023. Fabrication combines global jewellery and technology demand. Investment includes ETFs, bar and coin and OTC demand. Supply includes mine production and recycling. We have omitted hedging and assume it to be unchanged.

For 2024, the consensus view of a soft economic landing in the US (at least) remains on track for now. To recap, we see the effects of a soft landing as neutral to mildly positive for gold, driven by:

  • slightly lower but still elevated long term interest rates: neutral to positive for gold
  • a flattish US dollar: neutral to positive for gold
  • below trend economic growth: mildly negative for gold
  • lower inflation: mildly negative for gold
  • elevated geopolitical risks: positive for gold.

Yet we believe recession risk remains quite high even as, in the short-term, economic strength and inflation data points the other way.

Investment: visible weak, invisible strong

Global gold ETFs started the year on the backfoot with outflows similar to October 2023, although so far in January North American funds have been more actively selling than European funds. This could be a feature of rebalancing; hence we don’t view this as the start of a trend. Our models suggest that we are likely to see continued small outflows due to strong equity markets and constrictive policy conditions. Equity sentiment appears toppy, however, so a consolidation may not be far off. In addition, policy rates are expected to come down and quantitative tightening is expected to slow – or perhaps even cease – before year-end, both of which could be positive for ETF demand.

OTC activity can, in part, be mirrored by futures positioning. Managed money net longs climbed close to a three-year high in Q4. Alongside central banks and some OTC demand, this sector has helped prices push higher in the absence of global gold ETF inflows but are perhaps in need of some short-term consolidation (Chart 2). Furthermore, recent US election years have seen a pattern of reduction in net longs – perhaps to reduce event-risk exposure. However, we believe speculative interest will be positive in 2024, given that on an average annual basis net longs are by no means extended and overall sentiment is far from frothy. In addition, the tense geopolitical and political environment, alongside possible rate cuts in Q2, should help the cause.

Like jewellery, much emerging market bar and coin demand is price sensitive and record high prices look set to constrain 2024 growth in this sector. And like jewellery, bar and coin demand has been more resilient than expected. This is particularly true in China, where a lack of alternatives and a hedge against currency volatility, along with continued purchases by the People’s Bank of China (PBOC), have been prominent drivers. But price is only one factor. While an economic slowdown is likely to dampen affordability in nominal terms, mitigation may come in the form of falling if inflation, especially if – in countries where inflation has been rife – it falls enough for buyers to feel wealthier in real terms.

US coin demand may get a boost from both election uncertainty and outcome, based on the quite consistent historical record. A Democrat win has typically elicited considerably stronger buying post-election, but we believe the stakes are so high that demand is likely to benefit regardless of outcome. Our analysis suggests coin demand is most politically sensitive, followed by speculative futures, bar demand and ETF demand last.

Fabrication demand: jewellery hanging on in there, AI to the rescue for tech

2023 was marked by surprising resilience in jewellery and technology demand. We consider it likely that last year’s  levels will be repeated in 2024. Indian jewellery demand should continue to benefit from the purring of a healthy economic engine, although high prices will potentially present a greater headwind.1 China's gold jewellery demand is likely to remain stable: supported by consumers searching for value preservation, but challenged by an expected fall in wedding numbers, an elevated gold price and consumer preference for light-weighted products, all of which will present headwinds.

Western demand is at risk of succumbing to the cost-of-living crisis as well as a higher gold price. But there is some potential for real incomes to play a role in reviving demand towards the end of the year, should inflation continue to abate. Middle Eastern demand is also likely to slow somewhat and we expect to see a continued preference for investment products over jewellery.

Technology demand proved another surprising element in 2023, churning out stellar growth in Q4, albeit from a low base. Guidance from major chip manufacturers suggests 2024 will be a bumper year for semiconductors, with the AI sector a major contributor. As such, technology demand is likely to be somewhat insulated from high prices and a slowing global economy.

Central banks: the tide marches on

Our previous estimate for central banks proved too cautious. Not only have we seen consistent buying from certain banks, Turkey’s turnaround from heavy selling in early 2023 suggests to us that in general, buying plans are more durable in nature than we originally suspected. We therefore expect another year of strong buying overall, and if the price action over the last two years is anything to go by, central bank buying in excess of the longer-term average is very likely to provide solid price support.

Supply: new production highs likely, recycling unresponsive

A healthy slate of new mine start-ups in North America, Asia, and Australia, are poised to add to production estimates for 2024. Higher ore grades will support growth. Miners efficiently containing cost rises in aggregate against a backdrop of rising prices should entice a continuation of high levels of output. In gold mine production, surprises are generally biased to the downside from unexpected disruptions, which we account for in our expectations.

Recycling hasn’t responded to higher prices as much as we had expected. While recycling in China has responded to both higher prices and a weakening economic environment, a depletion of near-market stocks in India countered the price impact, particularly at the end of the year. In the Middle East, holders of gold have been reluctant to sell given the uncertain geopolitical environment. With this in mind, we expect prices to have only a moderate impact on recycling in 2024, so long as they don’t rise too far. An economic pickup in China could also mitigate higher recycling volumes. All in all a small rise is likely over 2023’s total.


  1. Our models for jewellery demand suggest a long run elasticity of 1 between jewellery demand and economic growth (GNI per capita) and an elasticity of -0.65 with log price changes. With GDP growth expected to be flat to down (Source: Oxford Economics baseline scenario, Nov 2023) and gold prices in INR expected to be up (Source: Gold Outlook 2024, World Gold Council), the price effect is likely to dominate the income effect in 2024.

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